This guide explains what a retail loan is, how the application journey works and the difference between secured and unsecured retail loans. You will also find the main types of retail loans, their benefits, eligibility criteria and the documents you need to apply. Read time: about 6 minutes.
Picture this: your air conditioner breaks down right before summer, or you finally find the bike you’ve been eyeing, but your salary account is a few days from replenishing. This is exactly the kind of moment a retail loan is built for. A retail loan is a popular financing option that allows you to meet your needs stress-free. Getting such a loan expands your purchasing power, so you can make a small-ticket or big-ticket purchase without worrying about funds at your disposal.
Retail loan, meaning a loan offered to regular customers, offers you complete freedom of usage. From ACs to bikes, you can use it to finance almost anything and repay in affordable EMIs. There are many types of retail loans you can access, making it easy to choose one based on your specific requirements.
Read on to learn what a retail loan is, its types, benefits and more.
DID YOU KNOW?
Retail loans include personal, home, auto, education, credit card and consumer durable loans — anything an individual (not a business) borrows for.
Retail Loan Meaning
In the lending industry, individual customers are called retail customers. As such, a retail loan is any loan that satisfies the financial requirements of an individual. The terms of such loans depend on your repayment capacity and creditworthiness, as well as the lender’s policy.
Once you avail of this type of loan, you must pay interest depending on your tenure and loan amount. This way, a retail loan helps you make an immediate purchase when you are short on funds.
How Does a Retail Loan Work?
- Choose the loan type and lender that best fits your purpose, whether it is a personal, home, auto or consumer durable loan
- Check your eligibility and submit your KYC, income and address documents, either online or at a branch
- The lender assesses your creditworthiness, income and repayment capacity to decide whether to approve your application
- On approval, you receive a sanction letter that states the loan amount, interest rate and tenure
- The lender disburses the funds, either directly to your bank account or to the seller for secured purchases like a vehicle or property
- You repay the loan through EMIs over the agreed tenure, which include both principal and interest
Secured vs Unsecured Retail Loans
Retail loans are broadly divided into two categories: secured and unsecured. A secured retail loan requires you to pledge an asset, such as your home or vehicle, as collateral. This usually means a lower interest rate and a higher loan amount, but the lender can seize the asset if you default. An unsecured retail loan, on the other hand, does not require any collateral. Approval depends mainly on your income, credit score and repayment history, and while the interest rate may be slightly higher, you don’t risk losing an asset if you face repayment trouble.
Also Read: Know Secured vs. Unsecured Loan
Types of Retail Loans
To better understand what retail loans are, you must know some of their types, which include:
Personal Loans
PRO TIP
Unsecured
This is the most common and versatile of all retail loans. With a personal loan, you can finance any personal expense. Since it is an unsecured loan, you can get funds from top lenders like Fibe without pledging any asset.
Home Loans
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Secured
Buying a home with a lump sum is extremely difficult, considering high property prices. With a home loan, you can buy your dream house with a secured loan. Moreover, you can pay back your loan easily with a tenure of 20 or 30 years.
Vehicle Loans
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Secured
A vehicle loan, also called an auto loan, is another secured loan that assists you in buying a car or a two-wheeler. Often, borrowers pay a down payment and use a loan to cover the remaining cost.
Education Loans
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Usually unsecured, though larger amounts may need a co-applicant or collateral
This loan is for those aiming to get funds for higher education or upskilling. It covers the cost of tuition and other academic expenses. In some cases, you can start repaying the loan once your education is complete, with certain lenders providing a moratorium of up to a year after the end of the course.
Credit Card Loans
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Unsecured
Credit cards offered by banks have a fixed pre-approved limit. Based on it, you can get an instant loan and repay it as per the terms.
Consumer Durable Loans
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Unsecured
This type of loan allows you to finance your purchases of electronics, furniture, household items, etc., with a short-term loan. Many lenders also have zero-interest offers for customers.
Also Read: Different Types of Loans That You Should Know
Benefits of a Retail Loan
In addition to providing quick financing, retail loans have other advantages, as mentioned below:
- The loan application process is simple and straightforward
- Retail loans offer finance for a variety of purposes
- Many online lenders have a quick disbursal policy where you can get the amount within 24 hours
- With flexible repayment options, you can choose a tenure that suits your financial capacity
- Competitive interest rates keep the cost of borrowing low
Eligibility Criteria for a Retail Loan
- Age: most lenders require you to be between 21 and 60 years old, depending on the loan type
- Employment type: salaried and self-employed applicants can both apply, though the required documents differ
- Income: a stable monthly income or business turnover that meets the lender’s minimum threshold
- Credit score: a higher score improves your approval odds and can get you a better interest rate
- Existing obligations: lenders check your current EMIs and debt-to-income ratio before sanctioning a new loan
Also Read: Check Your Eligibility Criteria for Personal Loan
Documents Required for a Retail Loan
- PAN card and Aadhaar card, or another valid photo ID and address proof
- A recent passport-sized photograph
- Income proof: salary slips for the last 3-6 months, or ITR and bank statements for self-employed applicants
- Bank statements for the last 3-6 months
- Property, vehicle or fixed deposit documents, if you are applying for a secured retail loan
Also Read: Documents Required For Personal Loan
With this information, you can easily choose a retail loan that fits your requirements and apply online. Among all these types of loans, getting a personal loan is easy and quick. When you choose the Fibe Instant Personal Loan, you can get from ₹5,000 to ₹10 lakhs in just a few minutes. To apply, download the Fibe Personal Loan App or register on our website.
FAQs on Retail Loans
1. Which type of loan is a retail loan?
Retail loans refer to all loans that help you finance your requirements as an individual. Simply put, retail loans are all loans other than business loans.
2. What is an example of retail lending?
Some examples of retail loans include personal, education, travel, consumer durable, car and two-wheeler loans.
3. Is a retail loan secured or unsecured?
A retail loan can be secured or unsecured, depending on the type of loan. Personal loans and consumer durable loans are usually unsecured retail loans. On the other hand, auto and home loans are secured loans, where the purchased vehicle or property acts as collateral.
4. Is retail financing a personal loan?
Yes, personal loans are the most versatile type of retail financing. However, personal loans are just one type of retail financing and also include home loans, auto loans and more.
5. What is retail lending in banking?
Retail lending in banking refers to the range of loan products that banks and NBFCs offer directly to individual customers, as opposed to businesses. This includes personal loans, home loans, auto loans, education loans and credit card loans, each priced and underwritten based on the individual borrower’s profile.
6. What is the difference between a retail loan and a business loan?
A retail loan is taken by an individual to meet personal needs, such as buying a home, vehicle or consumer durable. A business loan, on the other hand, is taken by a company or entrepreneur to fund business needs like working capital, expansion or equipment purchase, and is typically assessed based on the business’s financials rather than an individual’s income.
7. What documents are required to apply for a retail loan?
You will generally need your PAN card, Aadhaar or another address proof, a recent photograph, income proof such as salary slips or ITR, and bank statements from the last 3-6 months. For a
