Collateral-free personal loans are unsecured loans that you can avail to meet your financial obligations. Most personal loans are unsecured loans. These loans are quick, easy and affordable. Today, you can avail a quick loan through a personal loan app within minutes and meet all your financial needs with ease.
Being collateral-free, a cash loan does not put your assets at risk, even in the case of loan default. However, because of the high risk associated with these loans, the lender often levies a high-interest rate on these loans. In addition to this, you need to meet the eligibility criteria set by the lender to avail an unsecured personal loan. The most common eligibility criteria include your credit score, monthly income and your current monthly obligations. These parameters help your lender analyse the risk associated with your borrowing profile.
Read on to know more about collateral-free personal loans.
What is a Collateral-free Personal Loan?
Loans are majorly of two types – secured and unsecured.
Secured loans need the borrower to submit some form of guarantee against the loan. They are also known as collateralized loans. The lender can auction or sell the collateralized property in case you fail to make the repayment in full. Since lender’s money is secured in this form of lending, the interest rate levied on these loans is a bit low as compared to unsecured loans. The most common examples of secured loans are home loans and car loans.
Unsecured loans are those loans that do not require collateral for approval. Anyone who fulfils the eligibility requirements can easily avail an unsecured loan with ease. Since, the lender is at a higher risk of losing out on the loan amount in case of a default, the interest charges on these loans are often high. But it keeps your assets protected even in case of a default in your loan repayment. Unsecured loans are best for those who have just started their career and do not have any assets to put up as guarantee. They also work great for people who do not want to put their assets at risk for a small sum of loans.
The financial structure of any loan is based on the need for security that the lender may or may not require when offering quick finance. In case of a collateral-free personal loan, the interest charged is high and eligibility rules are strict.
Whether you opt for a secured loan or an unsecured loan, you must never miss out on the repayment schedule. Missing out on your EMIs even by a few days can impact your credit history significantly.
Top Features of a Collateral-free Personal Loan
The top features of a collateral-free cash loan are mentioned below –
- Attractive rates of interest
Today, various financial institutions provide unsecured personal loans which have led to increased competitiveness in the market. As a result, these personal loans come with competitive rates that the borrower can benefit from. Also, with the digitalization of the lending market, lenders are able to offer you collateral-free personal loans at much lower rates.
You can also check for some best rates in the market through online lending platforms like personal loan apps. These loans are highly affordable and are very easy to avail.
- Financing of high value
Personal loans are also available in high value, which makes them suitable for funding big-ticket expenses that one may encounter. Typically, with a reputed lender, eligible individuals can get financing of up to Rs.2 Lakh as an unsecured personal loan to fulfil their varying financing needs with ease. However, you must check your loan eligibility to know the maximum loan amount that you qualify for.
- Flexible tenures for repayment
Unsecured loans come with flexible tenures, which make them easy to manage and repay. The cash loan liability is thus deferred for repayment, divided into small EMIs for easy affordability. You can choose a loan tenure ranging from 12 months to 60 months as per your affordability.
- Fast approval and disbursal
When availing a cash loan through a personal loan app, you can expect instant approval within minutes. Once approved, the loan amount is disbursed you’re your account within the next 24 to 48 hours.
In conclusion, collateral-free personal loans are unsecured loans that you can avail with ease through banks, NBFCs or fintech companies. Apart from being collateral-free, these cash loans have several attractive features. However, you must note that the interest rate associated with such loans can be a bit higher as compared to secured loans.
But with the right research and financial knowledge, you can avail an unsecured personal loan at a much lower interest rate. Check out the personal loan apps for better deals on personal loans. Though unsecured personal loans do not pose a risk to your assets, failure of repayment can severely impact your credit score and impact your eligibility for future loans.