4 Must-Know Facts About Unsecured Loans

 An unsecured loan is a loan that you can get without any collateral. It is supported by an applicant’s solid economic stability and creditworthiness. If borrowers cannot pay back the loan, they may face consequences such as low loan credit score, legal actions, and collection agents. Many financial institutions, credit unions and banks offer unsecured personal loans. The procedure is standard and straightforward, involving the borrower’s documents authentication, forms that specify the loan terms and extension. 

Although they may seem easy to avail, sometimes they come with many hidden costs that can burn your pockets. If you are planning to borrow an unsecured business loan or a personal loan for other purposes, make sure that you read all the terms and conditions of the lender before signing the loan agreement to promote transparency and avoid any shocks and miscommunication in the future.  

Read this blog post to know common facts about unsecured personal loans and make an informed decision.

 1. Higher Interest Rate

Uncollateralized loans come with comparatively higher interest rates than secured loans. Usually, the ROI ranges between five to thirty six percent. Still, if you deal with online platforms such as KreditBee, you can get the best rates in the market with all other perks such as flexible repayment conditions, longer tenure, and more. Since these loans usually come with high interest rates, you must have good creditworthiness to secure less expensive rates.

2. Smaller Amount

The amount of unsecured loans is usually smaller – between Rs. 1,000 to Rs. 100,000. Although every bank/financial institution has a limit to offer loans without collateral, you can seek help from online platforms that can extend the amount up to Rs. 2,00,000 with a good credit score. Borrowers can also borrow more money by producing collateral against the loan amount.

3. Tenure

Borrowers can repay the loan amount in lump sum or installments. Usually, the tenure is up to six years, which gives applicants enough time to repay the loan. In case they are unable to repay the loan amount, the lenders can take legal actions against them or reach out to a debt collector. They can also sue the debtor through wage garnishment.

4. Qualifications

Lenders may check a few things about the applicants before offering unsecured loans to access their creditworthiness.  They will check if the borrower has a history of default or low credit score. They may also analyze their financial capability to repay the loan and interest amount. If the credit score is less, lenders may also ask for a third-person guarantee for the repayment.

To Wrap Up

Unsecured loans can be easy, given you have a good credit score. But, before choosing a lender, you must compare rates, penalties for missed payments and fees of different institutions so that you do not end up paying more in the future. Many banks allow negotiating the rates of interest. Make sure you get the best rates and know every hidden term of the loan agreement to avoid future consequences.

 

 

 

 


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