A personal loan is a popular option in the lending market. These can be availed easily and are very convenient. Personal loans are flexible and can be taken without any collateral. Decent credibility and credit score of the borrower ensure faster approval and disbursal of the loans. Personal loans are offered at a pre-defined rate of interest for a defined tenure, and the borrower has to pay the interest along with the principal loan amount. The applicant can use the loan amount according to one’s need and is not answerable to the lender.
Personal loans help to meet short-term financial emergencies like funding their wedding, education, home renovation projects, business, travel, or medical needs.
UNSECURED PERSONAL LOAN
Unsecured personal loans are those where the lender does not seek collateral against the loan. The personal loan interest rates are decided based on factors like credit score, employment, employer, and borrower’ income. Once the banks and financial institutions complete the minimal documentation work associated with this loan product, the loan is approved.
However, sometimes if the credit score of the borrower is poor, the bank may ask for the attachment of collateral. Such personal loans are called secured personal loans.
Unsecured personal loans are getting popular due to the following reasons.
- No requirement of collateral
- Being unsecured, personal loans do not seek any collateral like fixed deposits, bonds, or shares against the loan amount. Lenders only consider your monthly income and credit score and offer amount and interest rate based on these factors.
- Easy loan eligibility criteria
Financial institutions like banks and NBFCs offer personal loans with simple eligibility criteria. It makes them accessible to a wide array of people including business owners, self-employed individuals, and even professionals who can avail a personal loan.
The lenders consider the age, income, and credibility of the borrower before offering them a personal loan.
Personal loans are highly flexible and offered for the tenure that is comfortable to the borrower. Usually, these loans are offered for short durations ranging from a few months to 5 years, but lenders allow for longer tenures as well. It means that the borrower can fix the EMI of the loan on account of his monthly obligations. Easy repayment option makes them extremely popular amongst the borrowers.
Personal loan applicants are required to submit very few documents like photo ID proof and KYC details along with income proof, employment certificate, proof of address, and bank statements. These documents can be submitted online only along with the application form.
Aids in improving the credibility
Many people consider taking a personal loan to improve their credibility and credit score. Making timely repayment of the personal loan enhances the credit score over time which paves way for other loan products, better interest rate offers, and higher loan amounts for the borrower.
Lowers the loan cost
Personal loans come with shorter loan tenure and affordable interest rates. Borrowers can choose to pay back the loan with higher EMIs if it suits their pockets to save on some money.
With digitalization, many lenders are offering loans through their online portals. It has made the personal loan application process simple, hassle-free, and convenient. The borrower can apply for a personal loan from anywhere and at any time, there is no need to visit the bank to submit the form or documents. The whole process from application to processing and approval is now online. Once the loan is approved, the loan amount is transferred directly into the borrower’s account.
With so many benefits in their stride, unsecured personal loans are undoubtedly a popular option amongst borrowers.
Borrowers can choose to apply for a personal loan by directly visiting the bank’s online portal or checking and applying through LoansJagat, wherein they can compare over 40 lenders for their offerings in terms of personal loan interest rate, loan tenure, loan amount, and EMIs and choose the one which best suits their needs and pockets.