Today, although the markets have several incredible financing solutions to meet the requirements of the consumers, there is a consistent increase in the demand for loans without security.
One of the major reasons for their increasing popularity is that such loans are offered without demanding any asset in the form of security, which undoubtedly is a huge advantage for the borrowers who intend to borrow money online.
In addition, whether you require funds for planning your daughter’s wedding, for investing in a business venture, or for simply paying some medical bills, the lender does not impose any restrictions on the usage of the loan and hence, these loans can seamlessly meet your diverse requirements.
However, since there are no assets involved, the lender charges a slightly higher rate of interest as compared to the secured form of borrowing.
Also, due to the lack of assets, the lender offers this loan entirely on the basis of your creditworthiness.
A credit score of 650 or more can help you quickly seek approval for the application and avail a low rate of interest.
Besides the credit score, the lender may also consider factors such as your income and past payment history in order to assess your capacity to make the repayments.
Eligibility Criteria for Unsecured Loans
While there are a lot of requirements when it comes to qualifying for a normal loan, the lenders demand quite basic eligibility conditions for unsecured loans. The most commonly demanded conditions are:
- The age of the applicant should be between 24 to 60 years.
- The credit score of the borrower should be 650 or above, and he/she should not have any flaw in the past payment cycle.
- Both salaried and self-employed individuals can apply for the loan, however, they must have proof of a regular and stable source of income. Also, the ceiling on monthly salary is low in the case of unsecured loans.
- The applicant will be asked to provide documents such as identity proof, KYC, salary proof, and bank statements of the last few months.
Few Points to Keep in Mind Before Applying for a Loan Without Security
- Search for the top three or four lenders and calculate as well as compare the interest rate, tenure period, eligibility criteria, processing fee, and the total cost of borrowing charged by each one of them in order to offer you loans without security.
- Once you are done selecting a lender, use an EMI calculator to find out the amount you will be asked to pay in the form of monthly installments.
Also, you must try different interest rates, tenures and loan amount, to find out that EMI amount which can suit your financial condition.
- Keep the repayment period comfortably minimum and at the same time, try to reduce the loan amount in order to quickly get rid of the loan liability.
What are the Advantages of Taking a Loan Without Security?
- No demand for collateral – Clearly, this is the most important advantage of taking an unsecured loan as every unsecured loan is offered without demanding any asset, and this allows the borrower to improve his credit score, without fearing the risk of losing any asset after making a fault in the payment cycle. In case, you fail to make the payments on time, it will affect your score and your reputation, but your assets will not be seized by the lender.
- Quick documentation process – When it comes to secured loans, the lenders take a lot of time to assess the value of the assets and every little piece of information, before disbursing the funds in your account. However, this is not the case with a loan without security as the lenders simply do a quick background check and emphasize majorly your creditworthiness, and hence the documentation process doesn’t consume much time.
- No restriction on the usage of funds – Another advantage of taking unsecured loans is that you gain the freedom to use the funds for any purpose, whether it is for holiday, marriage, debt consolidation, business funding, or any other urgent need.
- Flexible repayment tenure – The lenders offer you the freedom to select a repayment tenure as per your financial condition. This way, you remain completely financially stress-free until the debt is paid off.
- Attractive rates of interest – The lenders provide borrower-friendly interest rates to make it absolutely convenient for the borrowers to pay back the entire loan amount. However, the rates are higher than what you receive in secured loans, but again, you can negotiate with the lender and get lower rates, only if you have a good credit score.
Needless to say, loans without security can act as the most reliable option when you are in urgent need of funds but do not have any asset to offer in the form of security.
In fact, with the points mentioned above, it has become quite clear that unsecured loans can offer your innumerable advantages while meeting your diverse funding requirements.
You just have to scout the markets and compare various lenders, before settling down for any one of them.