Consumption Loan Meaning

Consumption loans are those which are given by the banks to customer in order to meet consumption needs which may range from medical emergency, marriage purpose, educational purpose and so on. Given below are some of the important points about consumption loan –

  1. They are given to individuals in order to cater to one time needs rather than on continues basis so for example a person taking loan for business purpose cannot be considered as consumption loan because business expense is not a onetime expense.
  2. The entire amount of loan is given at the time of disbursement and it not given in parts.
  3. There is a limit to the amount of loan which one can take and that limit usually differ from bank to bank, however it ranges from 10000 to 5 lakhs rupees. It is also dependent on the repaying capacity of the borrower and credit history of the borrower.
  4. Interest on this type of loan is charged on a monthly basis and the borrower can repay in equated monthly installments which again is dependent on various factors like tenure, rate of interest and total amount of debt.
  5. It can be either secured or unsecured.

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