In India, there are secured and unsecured loans, which every lender sanctions to the borrower. In terms of unsecured funding, a borrower does not need to pledge any collateral, for example, a car, property or any other tangible asset to the bank. On the contrary to secured loans, unsecured loans types are much popular and on-demand as you can fund this loan for multiple purposes depending upon your discretion.
However, an unsecured personal loan is a bit of endangered finance for the bank, more than the borrower. Due to that reason, banks highly consider applicants with considerably soaring credit scores as eligible for the loan. In case you are looking for uncomplicated financing benefits plus want to consider an unsecured loan, have a look at the perks and drawbacks of an unsecured loan and aware of this loan type.
Perks of getting an unsecured personal loan
- No chance of succumbing collateral
Conceivably the most sweeping perk of getting a personal loan is that it offers no prospect to the borrower of missing collateral or secured assets such as car, home, gold, etc. Perhaps, this loan seems very lucrative to people since they do not require significantly precious properties to settle as collateral. Hence, you don’t have to worry about losing your hands from your assets even if you fail to repay due to unforeseen reasons.
- Simple application process
Once you become eligible for the loan related to a mortgage, the application plus sanction process of an unsecured loan takes less time. The lender also disburses the loan amount within few days. Besides, you can also select online lenders for this funding and get it approved shortly.
- Multifunctional loans
Secured loans like student loans, mortgage loans, automobile loans, etc., are fixed. You can utilize the fund for any single purpose. But in unsecured funding, you can use the debt to finance a plethora of expenses or emergencies.
Drawbacks personal unsecured loans
- Heavy eligibility criteria
Under unsecured loans, the risks for lenders are high since this loan does not demand any collateral from the borrower. So, lenders have placed heavy eligibility criteria to compensate for the prospected risk. They also oblige the applicant to have a surpassing credit score with no outstanding debts.
- Chance of debtor getting indicted
By any means, if you fail to repay the EMI on time, the lender can prosecute you by every system in court. Hence, it can also add attorney fees and other charges to your outstanding debts. In that contrast, you should carefully consider getting unsecured funding options to avoid any uncertainties.
- Less loan amount
In the absence of collateral, lender institutions would drive to great lengths to ensure that the borrower pays off the finance amount; hence, they mostly approve a small amount than secured loans. Including, the interest rates will also be high in this case, with shorter repayment tenure.
Now, we hope that you have a clear conception of the privileges and drawbacks of an unsecured personal loan. We always recommend every applicant firstly understand the positive and negative points associated with unsecured funding and then apply for the loan. So you can circumvent any and every part of uncertain risks.