Many individuals are under the impression that collateralising an asset is essential to get a loan. However, you can also opt for loans without putting up collateral or security. A Personal Loan is one such credit option. This blog guide to help you choose the best Personal Loan without collateral.
Understanding Personal Loan Without Collateral
A collateral-free Personal Loan does not require you to pledge any collateral or security. Instead, your eligibility is based on factors like your creditworthiness, repayment history, and credit score.
What is a Collateral in Loan?
When a borrower approaches a lending institution for a loan, they require the borrower to put up an asset as a security. The asset is called as collateral such as gold, property, fixed deposits, and businesses. A lending institution reserves the right to sell the collateral to recover unpaid dues.
If the borrowers are able to repay the EMI on time, the lending institution will return the papers and ownership to the borrower. However, searching for a loan that does not require collateral is a good idea to explore.
What is the Eligibility Criteria for a Personal Loan Without Collateral?
Every lending institution has eligibility criteria you must meet. Below are few of the criteria that you must meet:
- Age: It is the minimum age at the time of getting the loan and the maximum age at the time of loan maturity.
- Work Experience: It covers the minimum number of overall work experience and the minimum number of years at the current organisation.
- Citizenship: Most Indian lenders lend only to borrowers with Indian citizenship.
- Employer Category: Eligibility criteria for getting a Personal Loan without security would vary for salaried and self-employed professionals like doctors, chartered accountants, companies, and secretaries.
Please note that these criteria may change from lender to lender.
What are the Documents Required for a Personal Loan Without Collateral?
Every online Personal Loan application lists the documents borrowers are required to upload. So, to get collateral-free Personal Loans, here are the most asked documents to submit.
- KYC – The Know Your Customer (KYC) is a mandatory requirement that banks and NBFCs are required to check before approving a loan.
- Address proof – Proof of residence to check the veracity of the borrower. It is used to check citizenship with documents like an Aadhaar Card.
- Income proof – As mentioned above, monthly income determines eligibility. Hence, the lending institution will ask for proof of income.
- Proof of Employment – Salaried individuals can submit salary slips for three to six months. On the other hand, professionals can submit bank statements.
Also Read: How To Get Personal Loan Without Salary Slip?
Reasons to Get Personal Loans Without Collateral
The following points out why you should opt for a Personal Loan without collateral in India:
- Easy application process
- Flexible tenure
- Requires minimal documentation
- Quick disbursal of funds
What are the Advantages and Disadvantages of Personal Loan Without Collateral?
Here are the advantages of a Personal Loan without collateral:
- If you lack significant collateral like property or equipment, qualifying for an unsecured loan might be easier as it does not require such assets.
- Choosing an unsecured loan minimises the risk of losing assets in case of loan default. With secured loans, collateral can be seized, while unsecured loans may only lead to legal actions for debt collection.
- No collateral loans often feature shorter repayment terms, potentially allowing quicker debt resolution. They also offer variable interest rates, providing flexibility based on market conditions.
- Applicants with good credit may secure lower interest rates with unsecured loans, resulting in cost savings throughout the loan's life.
- Obtaining approval for this type of unsecured loan is typically faster since there is no need for collateral assessment, ensuring a quicker receipt of needed funds.
Here are the disadvantages of a Personal Loan without collateral:
- Due to the perceived risk without collateral, unsecured loans often come with higher interest rates, making borrowing more expensive.
- Lenders may demand good credit to mitigate risks, potentially excluding those with lower credit scores from accessing unsecured financing.
- Lenders tend to cap loan amounts for credit without collateral, restricting the total funds available compared to secured loans.
- Defaulting on a Personal Loan without collateral could lead to legal actions against personal assets, such as bank accounts or wages, unlike secured loans where the collateral is the sole risk.
- Some unsecured loans may feature shorter repayment periods, potentially resulting in higher overall interest payments. It is crucial to fully comprehend the loan terms before acceptance.
Also Read: How To Get An Instant Paperless Personal Loan Online?
How to Apply For a Personal Loan Without Collateral?
Every lending institution will have its processes to follow when getting a Personal Loan. However, at Poonawalla Fincorp, you can enjoy simple and hassle-free process. Here is what you need to do:
Step 1: Click on the ‘Apply Now’ button and open the application form.
Step 2: Fill in the required details like name, PAN card number, and other required details.
Step 3: Attach the documents and click on the ‘Submit’ button.
To Conclude
Borrowers can easily get a Personal Loan without collateral or security from Poonawalla Fincorp if they meet the criteria and consider the repercussions of not meeting their debt commitments. You must calculate the EMIs before taking the loan and must not overborrow.
Frequently Asked Questions
- What determines my eligibility for a Personal Loan without security?
The eligibility criteria for a Personal Loan without security are as follows:
Age: 22 years at the time of loan application and up to 57 years at loan maturity
Work experience: Applicants need a minimum of 1 year of work experience, and they should have been employed steadily at their current job for at least 1 month.
Citizenship: Indian citizenship
Income: Monthly net take-home salary should be a minimum of Rs. 30,000.
- Does a Personal Loan without collateral come with higher interest rates?
The interest rate of a Personal Loan without collateral can vary from a secured Personal Loan. Despite the change in interest rate, you can rest assured knowing that you don’t have to put up any assets as security against the loan amount.
- What is the minimum credit score for a Personal Loan without security?
The ideal credit score that you should possess to avail of a Personal Loan without security is 750 and above. This is considered an excellent credit score and can help you get a Personal Loan at low interest rates.