An unsecured loan provides the applicant the benefit to apply for a loan without keeping an asset as security to the lender. The lenders while processing unsecured personal loans do not ask the purpose of the loans to the applicant. This gives the applicant the liberty to spend the loan amount as he or she desires. You can use this loan to make a purchase, pay debts or an event or festival.
Sometimes the lender may ask your purpose of the loan which will be the part of his decision to approve the loan. The loan amount can vary from INR 1000 to INR 50,000 and can be paid by the applicant within the durations of one to seven years.
In comparison to the banks, the interest rates on unsecured personal loans are higher because the lender has to take a big risk while providing money on the least documents provided. Also, there are various charges for the banking procedures such as establishment fees, annual fees, and monthly fees. The prepayment charges of the loan differ from each lender. Some charge prepayment fees while other do not so this can make it easy for the applicant to pay the loan back to the lender as soon as possible.
You can compare between different lenders and choose the one you wish to apply for the loan. You can compare them on the basis of interest rate that is charged on the loan. The maximum and minimum loan amounts provided by the different lender the applicant can check with the lender and his maximum money lending limit and if the needed amount matches the limit provided you can opt for that money lender. While processing the loan a money lender can apply charges for the provision of the loan these charges can prove fatal to the applicant, you can also check if the moneylender is providing you with any kind of special feature such as online loan account management that allows you to manage your personal loan conveniently.
Pros and Cons of Unsecured Loans:
Asset Security not Needed: For the processing of the loan the applicant need not provide an asset as a security to the lender.
Flexible Loan Purpose: To apply for this loan the applicant does not need to worry about the loan purpose and the concern of the money lender as in this type of loan the applicant can use the loan amount as he desires the loan cannot be rejected on the basis of the purpose of the loan
Easy Application: Unsecured loans are easy to apply for; these loans can be processed even with fewer documents. These types of loans are now available online on the moneylender’s website where the applicant fill out an application form and upload the documents and as soon as the lender gets the application he goes through the application and processes the loan.
Higher Fees: As there are many risks that a lender has to take while processing an unsecured loan the lender can charge the applicant with a high establishment fee.
Penalties for Delayed Payments: The lender can charge the applicant with a penalty of a certain amount if the applicant misses any payments of the loan.
Higher Interest Rate: When you apply for an unsecured personal loan the interest rate is higher when there is no collateral offered for the loan security due to risk that is involved in the processing of the loan.
Apart from these points in personal loans disbursal process is also quite fast as compared to other secured loans. Unsecured loans are a considerable option for the people with low credit score and can be processed easily though the interest rates are comparatively high one can opt for unsecured loans for flexible use of money.