Those looking to borrow money can choose from several financing alternatives. These include securedloans that require collateral, such as jewellery, a house, or a vehicle. Credit cards are anothercommon form of financing, as they offer a revolving line of credit that can be used to make purchases.The most lucrative option, however, is unsecured lending, which does not require collateral and rely solely on the borrower's creditworthiness.
What is an unsecured loan?
Unsecured loans are credit options that do not require collateral. These loans typically offer smaller amounts when compared to secured loans like mortgage loans.
An unsecured loan is usually provided without any end-use restrictions. The credit amount can be used to cover a variety of expenses, including weddings, further education, home renovation, and medical emergency.
The Bajaj Finance Personal Loan is one of the finest examples of an unsecured loan in India, with its high loan value, competitive personal loan interest rates, and flexible loan repayment terms.
Unsecured loans examples
Here are some common types of unsecured loans:
- Personal loans: These are general-purpose loans that can be used for various personal expenses, such as weddings, home improvements, medical expenses or any other unexpected expenses. The interest rates and terms can vary based on the borrower's credit score.
- Credit cards: Credit cards are a form of unsecured revolving credit. Cardholders can make purchases up to a specified credit limit, and they have the flexibility to repay the balance over time. Interest is charged on the unpaid balance.
- Student loans: Unsecured student loans are loans that help students cover the costs of education, including tuition, books, and living expenses. These loans often have favorable terms and low-interest rates for students.
What are the types of unsecured loans?
Unsecured loans come in various forms catering to different financial needs. The primary types include personal loans, which are versatile and can be used for various purposes without collateral. Credit cards offer revolving credit lines with varying interest rates. Student loans assist with education expenses and often don't require collateral. Payday loans provide quick cash advances, typically due on the borrower's next payday but come with high interest rates. Additionally, there are lines of credit, where borrowers can access funds up to a predetermined limit as needed, and peer-to-peer loans facilitated through online platforms connecting borrowers with individual investors.
How does an unsecured loan work?
The credit worthiness of an applicant is typically taken into consideration before unsecured loans are approved. These loans are frequently approved based on a person's CIBIL Score. The applicant's loan payback history is also considered, along with other aspects including the source of income, age, and employment before the requested amount is approved.
The probability of receiving quick approval for an unsecured loan is typically higher for people with strong credit scores and stable incomes.
What are the benefits of an unsecured loan?
The following are a few advantages of unsecured personal loans:
1. Simple application procedure
Individuals can get unsecured loans quickly and without any hassle.
Bajaj FinservPersonal Loanare usually disbursed in less than 24 hours* after being approved. One of the main benefits of unsecured loans is that there are not many documents that need to be checked before accepting the loan amount because there are not any collaterals involved.
2. Minimal documentation
A personal loancan be obtained with the submission of minimal documents. With Bajaj Finance, the following documents are required while applying for a personal loan:
- KYC documents: Aadhaar/ PAN card/ passport/ voter’s ID.
- Employee ID card.
- Salary slips of the last 3 months.
- Bank account statements of the previous 3 months.
3. Flexible tenures
Bajaj Finserv Personal Loans are popular for their flexible repayment tenures, making them the best choice. For a term loan, customers can choose a tenure of up to 96 months. In addition to a regular term loan, Bajaj Finance also offers two unique variants of Flexi Loans - Flexi Term Loan and Flexi Hybrid Loan. This is the best choice for those who wish to enjoy flexibility in their repayment capacity.
4. Quick disbursal
Bajaj Finserv personal loans are popular for their speed of loan processing, which can be disbursed within 24 hours* of approval. This makes it the perfect option for funding unplanned and immediate expenses without breaking your savings.
Unsecured loans vs. secured loans: which is better?
Unsecured Loans
- Advantages: No collateral needed, easier approval for those without assets, and typically faster application processes.
- Disadvantages: Higher interest rates, lower loan amounts, and stricter credit requirements due to the lender's higher risk.
Secured Loans
- Advantages: Lower interest rates, higher borrowing limits, and potentially better loan terms due to reduced lender risk from collateral.
- Disadvantages: Requires valuable assets as collateral, and defaulting could result in asset loss.
Pros and cons of unsecured loans
Pros of unsecured loans
- No collateral required:
- Description: You don’t need to pledge any assets (like a car or home) to secure the loan.
- Advantage: Reduces risk of asset loss; accessible to those without valuable assets.
- Faster approval process:
- Description: Applications are often processed quickly compared to secured loans.
- Advantage: Funds can be available for urgent financial needs.
- Simpler application process:
- Description: Requires less documentation and fewer procedures than secured loans.
- Advantage: Easier and more straightforward application for borrowers.
- Flexible use of funds:
- Description: Loan funds can be used for various purposes, such as debt consolidation, personal expenses, or emergency needs.
- Advantage: Versatile financial solution for different needs.
- No risk of asset loss:
- Description: Failure to repay doesn’t lead to the loss of any personal property.
- Advantage: Lower risk compared to secured loans where collateral is at stake.
Cons of unsecured loans
- Interest rates:
- Description: Interest rates are typically higher than secured loans due to increased risk for lenders.
- Disadvantage: Higher overall cost of borrowing.
- Lower borrowing limits:
- Description: The maximum loan amount is often smaller compared to secured loans.
- Disadvantage: Less suitable for large financial needs.
- Stricter credit requirements:
- Description: Better credit scores are generally required to qualify for an unsecured loan.
- Disadvantage: Harder to get approved with poor credit.
- Higher monthly payments:
- Description: Due to higher interest rates, monthly payments can be higher.
- Disadvantage: May strain your monthly budget.
- Potential for fees and penalties:
- Description: Unsecured loans might come with origination fees, late fees, or prepayment penalties.
- Disadvantage: Additional costs beyond just the interest rate.
Qualifications for an unsecured personal loan
The eligibility of personal loan differs from lender to lender. You can qualify for a Bajaj Finance Personal Loan once you meet the five simple eligibility criteria mentioned below:
- Nationality: India
- Age: 21 years to 80 years*.
- Employed with: Public, private, or MNC.
- CIBIL score: 685 or higher.
- Monthly salary: Starting Rs. 25,001, based on the city you live in.
*You should be 80 years* or younger, at the end of the loan tenure.
How to apply for unsecured personal loan?
You can apply for unsecured personal loan by Bajaj Finserv by following these simple steps:
- Visit the personal loan page and click on ‘APPLY’
- Enter your 10-digit mobile number and OTP.
- Fill in the application form with your basic details.
- Now, click on ‘PROCEED’ to visit the loan selection page.
- Enter the loan amount that you need. Choose from our three personal loan variants –Term, Flexi Term, and Flexi Hybrid.
- Choose the repayment tenure – you can select tenure options of 6 months to 96 months and click on ‘PROCEED’.
- Complete your KYC and submit your application.
To apply for a Bajaj Finserv Personal Loan, completethe online application form with your basic information, and choose the required loan amount and tenurethat best suits you. Submit the required documentsand receive a loan of up to Rs. 40 lakh.It is advisable to use personal loan EMI calculator to compute your repayments in advance and plan your repayment journey wisely.
*Terms and conditions apply.
