When we start working on our own, one common thought that comes to all our minds is that financial worries are now a thing of the past, and never again will we need to borrow money or take a loan. But there are times when we fall into an inevitable cash crunch scenario, and we need a way to get out of it quickly and in a hassle-free manner.
In such scenarios, applying for a loan is one of the best things to do, but the moment you start researching the types of loans available in India, you are presented with everything starting from secured personal loans to home loans and unsecured personal loans to credit card loans. Although these terminologies may look simple at face value, as a future borrower, it is important for you to know the meaning of these terms and thus in today’s article, we will tell you all about unsecured personal loans, its advantages and disadvantages, and most importantly how you can apply for one.
Let’s get started.
Table of Contents
Personal Unsecured Loan: Meaning
The first and most important thing you need to understand is the meaning of an unsecured personal loan. In simple terms, an unsecured personal loan can be understood as a loan for which you do not need to put forward any type of collateral or asset. Any loan that does not ask for collateral or defers you from pledging any type of asset can be categorized as an unsecured loan.
In general, these types of loans are offered to individuals with moderate to high creditworthiness, meaning they have a good credit score and history. Although the sum you can secure through an unsecured loan is less in comparison to secured loans, these are immensely helpful, especially when you are in a cash crunch scenario.
The concept of an unsecured loan was not much popular in India until recently, when banks and NBFCs started it as an offering to include applicants from all economic backgrounds. One of the main advantages other than the fact that these are collateral-free loans is that these loans generally come with low and highly competitive interest rates.
Features and Benefits of an Unsecured Personal Loan
Now that you know the meaning of an unsecured personal loan let us explore some of its main features and benefits.
- One of the first and most important benefits of an unsecured personal loan is the wide acceptance of all income groups, thus enabling both salaried as well as self-employed individuals to apply for it.
- Depending on the lender you choose, you can get a personal unsecured loan for up to 25 lakhs in India.
- Interest rates for unsecured loans are highly competitive and low. For example, MoneyView, which is a leading lender, offers an interest rate of 1.13%.
- The repayment schedule for a personal loan is highly flexible and ranges from as low as 3 months all the way to 60 months, depending on the lender.
- Government employees can easily apply and get approved for this loan.
- The option of foreclosing an unsecured loan is also present.
Interest and Charge
As with all other forms of loan, an unsecured personal loan also comes with a setlist of fees, charges, and interest. While the rate of interest depends on the lender, there are a couple of factors that are taken into account to provide you the best offer.
- Your net monthly and yearly income
- Your credit score
- Your past loans
- Your age
- Your city or place of residence
- Your overall creditworthiness
- Your employment type: self or salaried
Usually, the interest rates for unsecured loans can range from 10% all the way to 24%, depending on the factors mentioned above and also on the lender you choose for the personal loan.
List of Documents You Will Require
In India of 2020, applying for a personal unsecured loan has become very easy, mainly due to the fact that most lenders offer a completely online and paperless application process. However, even with online applications, there are a couple of documents you will need to keep handy.
- Your PAN Card
- Your Aadhar Card
- Your Registered Phone Number
- Last 6 months bank statement
- Salary Slip for the last 3 months
How to Apply for a Personal Unsecured Loan
Applying for a personal unsecured loan is fairly simple and straightforward. Follow the below-mentioned steps to secure the loan amount you need.
- Visit the official website of the lender or download their application from either the App or the Play Store.
- Log in to the application through your mobile number and enter the OTP to continue with the process.
- Enter your personal details, followed by employment history and financial information to proceed with the application.
- Once all the steps are complete, wait for the approval to arrive.
Things to Keep in Mind
Now that you know all about personal unsecured loans, before you go ahead and apply for one, here are some things you need to keep in mind.
Not All Lenders Are the Same
One of the first and most important things you need to make a note of is that not all lenders are the same, meaning that not everyone will offer you the same terms and conditions and also not the same interest rates. While it may appear that everyone has the same set of terms and conditions for an unsecured personal loan, as a borrower, it is your duty and responsibility that you conduct proper research yourself and goes through the terms and conditions before you apply for the loan.
There are a few lenders in this space who add hidden charges every time you participate in a transaction with them. These charges can include everything from disbursement charges to processing fees and much more. Thus it is always important that you check with the lender for hidden charges and also check third party reviews, before applying for one.
Significant Impact on Credit Score
Although unsecured personal loans come collateral-free and have flexible repayment schedules, if you break your discipline and fail to pay your EMIs on time, the impact will be significant and hard to recover from. Although unsecured personal loans are designed to make your life simple and easy, if you fail to live up to your commitments, then they can quickly become financial burdens.
Conclusion A personal unsecured loan can be immensely beneficial when you are in a cash crunch scenario. With instant approval and disbursement, paired with low-interest rates and flexible repayment schedules, unsecured loans are truly one of the best financial instruments available. So if you need cash urgently, go ahead and apply for an unsecured personal loan today.