Unsecured Loan: Interest Rates, Types and How To Apply?

 Everyone wishes for financial stability. However, it is not always possible to keep your expenses under control. This is where the idea of loans comes into play. There are primarily two types of loans: secured loans and unsecured loans. Personal loans are unsecured loans, whereas home and car loans are secured loans in which the property or vehicle is pledged as collateral. This is because personal loans typically do not require a guarantor or the pledge of collateral.

So, what are the different types of unsecured loans, their advantages, and how do they apply? Let's get started.

Table of Contents

1. Unsecured Loan: What Is It?

2. Unsecured Loan: Types

1. Personal Loans

2. Education Loans

3. Peer-to-Peer Finance

4. Cash Loans

5. Credit Card Loans

3. Unsecured Loan: Interest Rates

4. Unsecured Loans: Features and Benefits

5. Unsecured Loans: Documents Required

6. Unsecured Loans: How To Apply?

7. EFT Capital - Get Any Loan With Better Interest Rates

Unsecured Loan: What Is It?

An unsecured loan is a type of loan that does not require any collateral or security. The borrower's assets are not prioritized here; their creditworthiness is at stake. Lenders typically look at your credit score, monthly/annual income, repayment capacity, and employment status for unsecured loans.

Unsecured Loan: Types

Personal Loans

A personal loan is the most common type of unsecured loan. When applying for a personal loan, you are not required to state the reason for the loan. This is also an instalment loan in which you repay the loan in equal monthly instalments (EMIs) over a set period. Personal loans are available from banks and NBFCs both online and offline.

Education Loans

An education loan also referred to as a student loan, is a loan that can be used to pay for your education course fees. The best feature of education loans is the moratorium period, during which the borrower is not required to pay anything. It is also referred to as a vacation period or a waiting period. A student applicant may also be eligible for interest rate subsidies and flexible repayment options. These loans can be utilized to pay for hostel, library, and mess fees, as well as course and other academic fees.

Peer-to-Peer Finance

This type of loan is provided by a lender other than a traditional lender, such as a bank or an NBFC. You can borrow money from individuals or your peers. These loans are typically subject to a fixed-rate interest system. This is a simpler method of obtaining loans. Peer-to-peer loans have less stringent eligibility requirements. These loans have competitive interest rates.

Cash Loans

Cash loans are small-dollar personal loans that borrowers receive in the form of cash. Many banks and NBFCs provide cash loans to individuals in the form of personal loans or business loans.

Credit Card Loans

Credit cards are almost always unsecured. So, if you need money quickly, you can get a loan against your credit card. These are typically pre-approved loans with higher interest rates than personal loans. On the other hand, banks offer credit card loans to select credit cardholders based on their payment history, credit score, and other factors.

Unsecured Loan: Interest Rates

Many factors must be considered when determining the interest rate on an unsecured loan. These factors include your income, monthly obligations, and location, depending on whether you are salaried or self-employed. Unsecured loan interest rates can start as low as 8% per year and reach as high as 36% per year.

Unsecured Loans: Features and Benefits

Loan application is simple and convenient: Unsecured loans typically have a very simple and convenient application process. Customers are not required to visit the lending bank's branch regularly to obtain this type of loan. These loans are very simple and can also be obtained through an online application.

Short turnaround time: Banks process unsecured loan applications quickly and efficiently. These loan applications are processed quickly, sometimes in less than 24 hours. As a result, unsecured loans are an extremely useful financial tool in times of monetary emergency.

High-interest rate: Because borrowers do not need to provide collateral to obtain an unsecured loan, these loans have a higher interest rate than other types of loans. The loan applicant's monthly or annual income determines the interest rate on these loans.

There is no need for collateral: Unsecured loans do not require customers to submit any collateral as security to the lending bank. If you fail to repay this loan, your assets are safe with you. As a result of this distinguishing feature, unsecured loans are becoming increasingly popular among customers.

The higher the income, the greater the loan amount: The higher the applicant's income, the higher the loan amount banks offer as an unsecured loan. This means customers can obtain unsecured loans based on their monthly or annual income.

Minimum documentation required: Unsecured loans require very little documentation. Most lenders now allow customers to submit these documents online, and the entire process is paperless.

Unsecured Loans: Eligibility Criteria

• The applicant should have a steady job. A consistent employment history is critical in making a customer eligible for an unsecured loan.

• Salaried individuals with a minimum of two years of professional experience or self-employed individuals with a minimum of five years of earning tenure

• The applicant should be between 25 and 65 years old for salaried borrowers and between 21 and 60 years old for self-employed individuals.

• Current financial statements are critical in determining loan eligibility and should be provided during the loan application process.

• Customers' credit histories are also considered when determining eligibility, interest rate, and loan amount.

• The lending bank considers pending EMIs from other loans when determining your loan amount eligibility.

Unsecured Loans: Documents Required 

The documents needed to apply for an unsecured loan vary depending on the financial institution. However, here is a list of common documents required when applying for unsecured loans.

• A recent passport-size photograph

• A government-approved form of identification

• The loan application form was duly completed

• Bank account statement for the previous six months Document confirming age

• Address verification documentation

• Slip for Income Tax Return

• A fee for processing cheques

Unsecured Loans: How To Apply?

Company website: Almost all of the market's top lenders now offer their services via their websites. You can use your credentials to apply for a loan on the bank's official website.

Loan aggregators: Third-party loan aggregators can assist you in locating the best deals on the market. You can compare the various loan products and select the best one for your needs. This allows you to compare various lenders' interest rates and processing fees before making a final decision.

Branch office: You can also apply for a loan at a lender's branch office. With the introduction of the internet, this is no longer the most popular option among today's borrowers. If you are unfamiliar with the internet, however, you can use this option to apply for a loan.

EFT Capital - Get Any Loan With Better Interest Rates

EFT Capital is distinct in the entire loan application process; the entire process can be completed online, saving customers time and frustration. The procedure is simple and clear and takes only a few minutes to complete. Customers can be confident that they will not be hit with unexpected expenses thanks to the company's flexible repayment procedures and lack of hidden costs. So, reach us for any unsecured loan with an easy application process and better interest rates.