Anyone can land in a tight spot financially at any point in time. In such a situation, an unsecured personal loan is a great way to overcome any obstacles in the short-term. An unsecured personal loan is given to individuals for personal use, without asking them to pledge any valuable assets as collateral or guarantee. Now, let us study the features of a personal loan without collateral, the types of loans and the best options to choose from.
Features of unsecured personal loans:
Low risk for the borrower
In the event of a default, the borrower would not lose possession of valuable assets to the lender, as there is no asset hypothecation.
Good credit score
The creditworthiness of the borrower, based on the track record of regular and timely repayment of loans would help get a personal loan at lower interest rates.
Personal loan can be used for diverse purposes ranging from furnishing your home to buying jewellery. The lenders do not insist on any specific utilization.
Flexibility in repayment
The tenure ranges from 1-5 years, enabling one to effectively plan repayment. Since the loan amount sanctioned depends on the income position, the EMI repayment is generally an amount that can be comfortably managed.
Types of Unsecured Personal Loan
As the name suggests, one signs or promises to repay and gets the loan amount. These are structured as installment that amortise with time. They are extended to borrowers with a good credit standing and carry low interest rates. The main advantage is that such loans help build a credit history, so that one can easily borrow or apply for a loan in the future. It can be used for various purposes, such as medical treatment, child’s education, wedding, home renovation, etc.
Line of credit
This works like a credit facility, whereby one can withdraw a certain amount from the credit limit, based on individual usage. For example, say a lender offers Rs 50,000 as unsecured personal line of credit. One withdraws Rs 20,000 and plans to repay the amount as soon as possible. In the meanwhile, in case of an emergency, the borrower can avail the balance amount, which is Rs 30,000, while repaying the previous withdrawal of Rs 20,000. Like a revolving credit, once repaid the amount is again available as credit facility. The advantage is that one bears interest only on the withdrawn amount and not the entire eligible credit limit.
Although popular due to instant access to credit, this is an expensive option. In credit cards, the interest rates are exorbitant (can go as high as 24-36% p.a.) in case of payment beyond the due date or payment of minimum balance and rolling over the outstanding dues to the next billing cycle.
In conclusion, opting for an unsecured personal loan at optimal rates, with a lump sum payout by the lender at the beginning is the best option. Besides, such loans may also be availed by those with not-so-healthy credit scores as well, although at a higher rate of interest. Else, one could improve one’s credit score by settling existing debts and then opt for an unsecured loan at favourable interest rates.
Now that you everything about unsecured personal loans, head over to Finserv MARKETS today if you are looking to apply for one. What’s more? Your online personal loan application can be processed right from the comfort of your home. So why wait? Apply for personal loan with us, today!
Finserv MARKETS, from the house of Bajaj Finserv is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment and exclusive EMI store, all under one roof- anytime, anywhere!