Introduction to Loans

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Loans can be dated back to the age after the barter system when goods and services were offered in exchange of some other goods or services.

In modern times, various types of Loans are offered by many Banks and Financial Institutions. Loans that are offered by these financial institutions are majorly provided for the below mentioned categories.

1. Personal Loan
2. Commercial Loan
3. Gold Loan
4. Agricultural Loan
5. Student Loan
6. Educational Loan
7. Mortgage Loan

Any individual or an organisation interested in availing any of the above mentioned Loans have to necessarily fit in the predefined criteria or eligibility criteria set by these Banks and Financial Institutions.

Different Banks have different amount of limit set for every loan or Credit Card or any other form of Credit that can be offered by them and they also have to consider the Debt Burden Ratio (DBR) prescribed by the Central Bank of that region.

Central Banks play a very important role in keeping track of the liabilities an individual or an entity can avail as a cap is placed on the borrowing capacity to allow the individual or the entity to have some cash in hand even after paying the monthly EMI prescribed by the Bank. For eg: A salaried individual having a salary of Rs50,000 can avail a loan that does not exceed an EMI of Rs 25,000 if the Central Bank of that reason has placed a cap of 50% on the DBR.

Individuals or entities who try to take more than the prescibed DBR will be rejected by these Banks and Financial Institutions and will be requested to reduce their current outstanding to avail another Loan or Liability.