What are the key features of a loan?

Loan Features: Interest rate: The cost of borrowing money. ... Loan period: The time it takes for a loan to be paid in full. Loan limits: The maximum amount of money lent to a borrower. ... Grace period: Time period after disbursem*nt which no payment on loan is required of the borrower.

What are the features of an unsecured loan?

Unsecured loans are offered by banks, credit unions and online lenders. Unlike secured loans, they're not backed by collateral and may be harder to get approved for than a secured option . However, they come with less risk as you won't need to worry about your assets being seized should you fail to make the payments.

What are the benefits of unsecured lending?

Advantages of unsecured loans In theory, unsecured loans are a less risky borrowing option because there's no danger of losing any assets if you can no longer repay the debt . They can also offer more flexibility than secured loans, with lenders tending to offer repayment terms of anything from one month to three years.

What is unsecured main advantage?

Here are the advantages of unsecured debt: Because unsecured loans do not require collateral, people don't have the risk of losing specific assets in case of default . The freedom from collateral may streamline the application process, possibly leading to quicker approvals.

What are the 3 main factors of a loan?

Other Factors That Affect Loan Structure Loan Term – The loan term refers to the terms and conditions of a loan. ... Principal or Loan Amount – The loan amount or principal is how much the loan is for. ... Collateral – The loan structure can shift depending on if the borrower puts up any collateral, such as personal assets. More items... Jan 25, 2023

What is a key feature of a secured loan?

Secured Loans Features Collateral Requirements : The loans are secured and backed by the collateral provided by the borrower. In secured loans, the loan amount should not exceed the value of collateral as it serves as a security for the lender in case the borrower defaults on repayment.

Why is an unsecured loan good?

Unsecured loans may offer more flexibility than secured loans . The application process may be simpler as you don't need to provide details of the asset you are using to secure the loan. There may also be more flexibility when it comes to making additional repayments.

What are the main features of unsecured note?

An unsecured note is a loan that is not secured by the issuer's assets . Unsecured notes are similar to debentures but offer a higher rate of return. Unsecured notes provide less security than a debenture. Such notes are also often uninsured and subordinated.

What are the cons of an unsecured loan?

Cons May have higher interest rates. May have strict requirements. May require a personal guarantee.

What is the danger of unsecured loans?

Default risk : The biggest risk associated with unsecured loans is the risk of default. This happens when a borrower is unable to repay the loan on time.

Why is unsecured debt better?

Risk: Unsecured loans may be a safer choice for some borrowers. If you fail to repay, only your credit will be affected . Some lenders allow you to go on a hardship plan if you can't make your monthly payments. These plans can involve lowering or deferring personal loan payments.

What are the benefits of unsecured credit?

An unsecured credit card doesn't require a security deposit and offers access to a revolving line of credit. It may come with benefits like cash back or travel rewards that can help you make the most of your purchases. Having a higher credit score can make it easier to qualify for an unsecured card with better terms.

What is the purpose of an unsecured loan?

You can use an unsecured loan for almost any purpose, such as home improvement projects, debt consolidation, or a wedding . However, lenders may have restrictions regarding the use of funds for certain activities, such as student loans or starting a business.

How to explain an unsecured loan?

An Unsecured Loan is a loan that does not require you to provide any collateral to avail them . It is issued to you by the lender on your creditworthiness as a borrower. And hence, having an excellent credit score is a prerequisite for the approval of an Unsecured Loan.

Unsecured Loans - Key Highlights, Features, and Benefits (2024)

Unsecured Loans

An unsecured loan is a loan that does not require any collateral. It is given based on the creditworthiness of the individual rather than relying on the assets of the individual as security.

Key Highlights of Unsecured Loans

An unsecured loan is based on the borrower’s creditworthiness

They are riskier than secured loans so require higher credit scores for approval

Credit cards, educational loans, and personal loans are examples of unsecured loans

If a borrower defaults on an unsecured loan, the lender may hire a collection agency to collect the debt or take the borrower to court.

Top Unsecured Loans 2024

Lender Name	Interest Rate	Minimum Loan Amount	Maximum Loan Amount	Benefits
HDFC Bank	10.50% to 21.00%	Rs. 50,000	Rs. 40 lakhs	Loan disbursal within just 2 seconds for pre-approved customers. For other customers, the Loan disbursal is within 4 hours Optional insurance coverage for other customers Hassle free application process
Yes Bank	10.99% p.a. onwards	Rs. 1 lakh	Rs. 40 lakhs	Repayment tenure is in the range of 12 to 60 months Speed and hassle-free application process Can transfer existing loans (With high interest) from other banks to Yes Bank
IDFC First Bank or Capital First	10.49% p.a. onwards	Rs. 1 lakh	Rs. 40 lakhs	Flexible repayment tenure of up to 60 months Online approval in just 2 minutes Hassle-free loan application process.

Best Unsecured Instant Loans/Advance Salary Loans 2024

Lender Name	Minimum Loan Amount	Maximum Loan Amount	Benefits
EarlySalary	Rs. 8000	Rs. 5 lakhs	Hassle-free application process Special loans taken for children’s school fees and shopping requirements Loan approval and disbursal within a few hours of applying Flexible repayment process.
Loan Tap	Rs. 50,000	Rs. 10 lakhs	Repayment tenure between 3 and 12 months Hassle-free online application process Instant loan disbursal within just 24 to 36 hours of applying
Quick Credit	Rs. 10,000	Rs. 1 lakh	Up to 30 days of repayment tenure 100% paperless verification. Loan disbursal within an hour
Flex Salary	N/A	Rs. 2 lakhs	Reasonable interest rate Open ended loan tenure Easy documentation

Eligibility Criteria For Unsecured Loans

Occupation: The applicant’s job should be stable, and his income must be regular.
Years of Experience: Salaried individuals with a minimum of 2 years of professional experience. Self-employed individuals with a minimum of 5 years of business tenure.
Age: Between 21 to 60 years for salaried borrowers and between 25 to 65 years for self-employed individuals.
Current financial statements: Current financial statements must be provided during the loan application process as they help in evaluating loan eligibility
Credit History: The credit history is a very important eligibility criteria that lenders look into. When your credit history is good without any payment defaults, you have a higher chance of qualifying for a loan.
Your current debts: The debts that you are paying currently are also considered for loan eligibility as it indicates whether you can handle more debt.

Documents Required For Unsecured Loans

Document	Salaried	Self-employed
Duly filled loan application form	Yes	Yes
A few passport size photographs of the loan borrower	Yes	Yes
Identity Proof - Passport, driving license, voters ID, PAN card (Any one proof)	Yes	Yes
Residence proof - Utility bill, passport, etc.	Yes	Yes
Salary slips for past 3 or 6 months	Yes	Yes
Processing fee cheque	No	Yes
Proof of continuity of business	No	Yes
Office address proof for self-employed individuals	No	Yes

How To Apply For Unsecured Personal Loans?

You can apply for an unsecured loan in the following ways:

Through the lender’s website: You can go to the lender’s website and apply for the unsecured loan. You can login using your credentials. You will be required to input your personal loan details.
Physically by visiting the office of the lender: You can go physically to the office of the lender and apply for the loan. However, this is time consuming and may involve more energy than applying online in just a few clicks.

Features and Benefits of Unsecured Loans

No Collateral: Unsecured loans do not require collateral. So, the borrower does not have to risk his assets by pledging them.
Higher interest rates: Since the borrower is not offering any collateral, the lender charges higher interest rates on unsecured loans to minimize the risk.
No tax benefits: Some of the loans given by banks like car loans, home loans, etc. qualify for tax benefits. Whereas, unsecured loans are not eligible for tax benefits.
Hassle Free Application Process: Unsecured loans have a completely online process, and it is easy to apply for them. You don’t have to physically visit the branch to apply for them.
Speedy Turnaround Time: Unsecured loans have a very quick turnaround time. The loan applications are processed in lesser than 24 hours. For this reason, unsecured loans come in very handy.
The loan amount is proportional to the income: Higher the income, higher the loan amount that you will be sanctioned in an unsecured loan. Thus, the loan amount is proportional to the monthly or yearly income of the individual.

Types of Unsecured Loans

Revolving Loan: A revolving loan is a loan that has a cycle of spending, repaying, and spending again. A maximum credit limit is set by the bank before itself. You can limit the credit limit completely or just parts of it as you wish. Once you have repaid your credit dues, the credit limit is restored. So, the credit limit provided can be used multiple times.

Term Loans: You can repay term loans in EMIs at regular intervals for a fixed time period. They come at a fixed interest rate. These loans can be obtained when you need a lump sum amount immediately.

Consolidate Loan: Consolidate loans are those that help in clearing your debts during financial crunches especially with rising interest rates. Once the debts are cleared, you can improve your repaying capacity by becoming debt-free.

Interest Rates and Other Charges Applicable on Unsecured Loans

The interest rates on unsecured loans are on the higher side as compared to that of secured loans. The lowest rate at which unsecured loans are offered is 9.9% p.a. across most leading banks in India. Like all other loans, there are processing charges applicable on unsecured loans. There are many banks which provide competent interest rates and flexible repayment features. The range of the interest rate on any unsecured loan is between 9.9% p.a. to 45% p.a. The borrowers can get the best interest rate based on their credit profile, income, employment and age.

FAQs Of Unsecured Loans:

1. Is unsecured loan considered as a debt?

Unsecured loans refers to debt that is not backed by collateral. The borrower does not have to pledge any specific assets as security for the loan.

2. Which loan is better? Secured or unsecured?

Secured loans have a lower rate of interest but they require collateral. However, unsecured loans have a higher rate of interest but they do not require collateral. To determine which type of loan is better? Secured or unsecured, you will have to do research to decide which type of lender and loan is best for you.Interest rates can vary across lenders and shopping around will help you compare between lenders to determine the best loan option for you. If you have a savings account, CD, or other asset that your lender is willing to accept as collateral, then you may want to apply for a secured loan. This is because your interest rate and APR will probably be lower. If you don’t have any assets to pledge, then you can apply for an unsecured loan, but you must be able to pay a higher interest rate.

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