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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 |
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Yes Bank | 10.99% p.a. onwards | Rs. 1 lakh | Rs. 40 lakhs |
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IDFC First Bank or Capital First | 10.49% p.a. onwards | Rs. 1 lakh | Rs. 40 lakhs |
|
Best Unsecured Instant Loans/Advance Salary Loans 2024
Lender Name | Minimum Loan Amount | Maximum Loan Amount | Benefits |
|---|---|---|---|
EarlySalary | Rs. 8000 | Rs. 5 lakhs |
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Loan Tap | Rs. 50,000 | Rs. 10 lakhs |
|
Quick Credit | Rs. 10,000 | Rs. 1 lakh |
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Flex Salary | N/A | Rs. 2 lakhs |
|
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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