Different Types of Loans & EMI Explained — A Simple Guide

Loans are common financial tools: personal loans, home loans, auto loans, and business loans. Each type has different interest structures, tenures, and costs. Understanding the loan type helps you choose the best option and calculate monthly payments (EMI) accurately.

Common loan types

Personal Loan

Unsecured loan used for emergencies, travel, or education. Interest rates are usually higher because there is no collateral.

Home Loan (Mortgage)

Long-term loan secured against property. Lower interest compared to unsecured loans but includes processing fees, insurance, and longer tenure.

Auto Loan

Secured against the vehicle. Tenure and interest depend on the vehicle age and lender policies.

Business Loan

Designed for working capital or expansion. May require business documents, cashflow proof, and sometimes collateral.

What is EMI and how it works?

EMI (Equated Monthly Installment) is the fixed monthly amount you pay to repay a loan. EMI depends on principal, interest rate, and tenure. Use our EMI Calculator to get exact numbers.

EMI formula (simple)

EMI = P × r × (1 + r)^n / ((1 + r)^n − 1)

(P = loan amount, r = monthly interest rate, n = months)

How to choose the right loan

• Compare interest rates and processing fees.
• Check prepayment and foreclosure charges.
• Keep EMI below 30–40% of monthly income for safety.

Tip

Always run an EMI comparison with different tenures using our EMI Calculator to see total interest and monthly burden.