A loan is an essential part of anyone’s life, we seek loans for big-ticket purchases as it eases out our pockets and meets our liquidity needs whenever necessary.
There are various banks, NBFCs, and other financial institutions that provide loan facilities to the user. The loan provided by them is categorized into two- Secured Loans and Unsecured Loans.
This categorization is primarily done to find out how safe it is for the bank to lend the money to the loan seeker.
In this article, we will discuss Unsecured Loan Types, Benefits, Interest Rates, Eligibility, and much more.
But first, let’s find out what is an Unsecured Loan.
What is an Unsecured Loan?
An Unsecured Loan is a loan type where the lender does not take any collateral against the loan and it is purely given based on the profile of the loan seeker, his/her credit score, and income levels.
Usually, when we seek a loan, the lender demands an asset like a house, car, etc. to be lent against the loan, but, in unsecured loans, there is no need for such an asset and you can get the loan easily.
Unsecured Loan Interest Rates of Various Banks
The followings are the interest rate and charges of some banks-
| Lender | Interest Rate | Minimum Loan Amount | Maximum Loan Amount |
| HDFC Bank | 10.50% to 21.00% p.a. | Rs. 50,000 | Rs. 40 lakh |
| Yes Bank | 10.99% p.a. onwards | Rs. 1 lakh | Rs. 40 lakh |
| IDFC Capital First | 10.49% p.a. onwards | Rs. 1 lakh | Rs. 40 lakh |
| EarlySalary | NA | Rs. 8,000 | Rs. 5 lakh |
| Quick Credit | NA | Rs. 10,000 | Rs. 1 lakh |
| Flexsalary | NA | NA | Rs. 2 lakh |
What are the Types of Unsecured Loans?
The following are the types of Unsecured Loans that you can use-
Personal Loans
A personal loan is a very common type of loan that anyone can take from banks or NBFCs. You can use this loan for multiple purposes like medical expenses, travel, home renovation, etc.
It is also an unsecured loan because you do not need any collateral for seeking this loan. Some banks provide the personal loan instantly within minutes making it easy and convenient for the loan seeker.
Education Loans
Good colleges often come with heavy fees and put a lot of financial burden on student’s families. The burden can be eased by using an Education Loan.
It is also an unsecured loan as you do not need any collateral for seeking this loan. With this loan, you can cover living expenses, tuition fees, the cost of books and stationery, examination fees, library fees, laboratory charges, and other education-related expenses.
Credit Card Loans
Your Credit Card is essentially a loan instrument that is unsecured and issued after analyzing your profile. It acts as a pre-approved loan which may come with a higher interest rate but very high liquidity.
You can use credit cards for spending on shopping, bill payments, etc, and earn reward points to do so. This reward point can be used to get amazing deals and offers.
Feature of Unsecured Loan
The following are the features of Unsecured Loan-
- There is no collateral or guarantor required for getting an unsecured loan. The loan will be provided to you purely based on your credit profile and historic records along with your income levels
- The EMI options in the unsecured loan are flexible making it accessible to every individual
- The EMI provided under the unsecured loan is quickly processed and disbursed faster as compared to other loans, in some cases, it can be as fast as 10 minutes
- You can use the loan for any purpose without any restrictions
- The eligibility requirement of the lender is less stringent and can be easily applied to
How to Apply for an Unsecured Loan?
You can follow these steps to apply for Unsecured Loan-
- First, inquire about the unsecured loan along with the interest rate from the various banks and NBFCs
- After completing the inquiry, you’ll have to select one of the banks or NBFCs for your application process
- Now, visit the bank/NBFCs branch and ask the bank representative for an unsecured loan
- Provide all the documents mentioned below and fill out the loan application form
- After filling out the form, you’ll have to submit the form along with the documents, your KYC will be completed and your application process will begin
- After beginning the application form, you may be interviewed and asked a few questions, and on the satisfactory result, you’ll be provided with a final quotation of your loan
- If you agree with the final quotation, your loan will be approved and the amount will be disbursed accordingly.
Documents Required for Unsecured Loan
The following are the documents required for Unsecured Loans-
- Address proof
- Identity proof
- Completed loan application form
- Age proof
- Salary, income tax returns, or other income documents
- Passport-sized photos, if required
FAQs
Yes, an unsecured loan can be taken by a self-employed person. he/she should have a valid credit profile with a good credit score. If you have a bad credit score then you can simply improve your credit score and reapply to get a loan.
The maximum loan tenure offered for unsecured loans is 60 months.
The minimum loan tenure offered for unsecured loans is 12 months.
Yes, you can apply for an unsecured loan online using the official website of the banks you are interested in.
