The Ultimate Guide to Secured and Unsecured Personal Loans
These loans are taken for a specific use such as buying a home or car or using in business. There is another kind of loan which is a multipurpose loan and can be availed for any kind of use of the borrower. Such loans are known as Personal Loans. Blog: https://financebuddha.com/blog/the-ultimate-guide-to-secured-and-unsecured-personal-loans
These loans are taken for a specific use such as buying a home or car or using in business. There is another kind of loan which is a multipurpose loan and can be availed for any kind of use of the borrower. Such loans are known as Personal Loans.
Blog: https://financebuddha.com/blog/the-ultimate-guide-to-secured-and-unsecured-personal-loans
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<strong>The</strong> <strong>Ultimate</strong> <strong>Guide</strong> <strong>to</strong> <strong>Secured</strong> <strong>and</strong><br />
<strong>Unsecured</strong> <strong>Personal</strong> <strong>Loans</strong><br />
How lovely it would be if money were in abundance for all of us. But the matter<br />
of fact is that being abundance is very far, most of the times we have <strong>to</strong> face a<br />
lack of money. Whenever we feel that a lack of fund is bringing obstacles <strong>to</strong> our<br />
lives, we can borrow it from our friends, families or the lending institutions<br />
which we are <strong>to</strong> return within a fixed period of time. Borrowing money which is<br />
expected <strong>to</strong> be paid back with interest is called a loan in technical terms. A<br />
person can avail a loan of many kinds such as a home loan, car loan or a<br />
business loan. As the names suggest, these loans are taken for a specific use<br />
such as buying a home or car or using in business. <strong>The</strong>re is another kind of loan<br />
which is a multipurpose loan <strong>and</strong> can be availed for any kind of use of the<br />
borrower. Such loans are known as <strong>Personal</strong> <strong>Loans</strong>. Here we have bought an<br />
extensive description on a personal loan <strong>and</strong> its kinds.
What is a <strong>Personal</strong> Loan?<br />
A personal loan is an installment loan which can be used for any personal use of<br />
the borrower. Such loans are repaid through EMIs. <strong>The</strong> tenure of a personal<br />
loan is generally from 12 months <strong>to</strong> 60 months. <strong>Personal</strong> loans are best <strong>to</strong> fight<br />
emergencies, as they are fast in disbursal. <strong>The</strong> processing of a personal loan is<br />
much faster than other loans because of a the minimal documentation.<br />
<strong>The</strong> Key Features <strong>and</strong> Benefits of a <strong>Personal</strong> Loan<br />
<strong>Personal</strong> loans are the most availed credit product of present credit market. This<br />
type of loan is popular all around the globe because of the benefits of it. Here<br />
are the features of a personal loan<br />
Minimal Documentation– A personal loan needs very minimum documents <strong>to</strong><br />
be submitted. One can avail a personal loan only with the basic documents such<br />
as identity proof, address proof <strong>and</strong> income proof.<br />
Quick Processing– <strong>Personal</strong> loans are best known for being fast in disbursal.<br />
One can fight any emergency with a personal loan as most of the lenders<br />
disburse a personal loan within a day. Some of the lenders even claim <strong>to</strong><br />
disburse a loan within a few hours which will be really helpful when you are in<br />
need of urgent fund.<br />
Can Avail Online– <strong>Personal</strong> loans nowadays can be availed online <strong>to</strong>o. Online<br />
loans are very convenient for the borrower as it saves much time <strong>and</strong> effort of<br />
both borrower <strong>and</strong> the lender. Online personal loans make a loan seeker apply<br />
personal loan online which is much faster, convenient <strong>and</strong> secured <strong>to</strong>o.<br />
Multipurpose– <strong>The</strong> best <strong>and</strong> the unique feature of a personal loan is being<br />
multipurpose. A personal loan can be used for any purpose of the borrower. A<br />
lender will never ask you the purpose of the loan. So whatever the use may be, a<br />
personal loan is fit for all.
Types Of <strong>Personal</strong> <strong>Loans</strong><br />
<strong>The</strong> prime feature of a personal loan is being multipurpose. <strong>The</strong>re are different<br />
types of personal loans which a person can avail in India. A personal loan can<br />
be divided mainly in<strong>to</strong> two parts- <strong>Secured</strong> Loan & <strong>Unsecured</strong> Loan. Here is a<br />
brief introduction <strong>to</strong> both kinds of personal loans.<br />
<strong>Secured</strong> <strong>Personal</strong> Loan<br />
A secured personal loan is a multipurpose loan which is provided <strong>to</strong> the<br />
borrower against a security. A borrower puts up collateral in the form of cash or<br />
property <strong>to</strong> secure the loan amount. In the event of not paying the loan, the<br />
lender has the right <strong>to</strong> take the possession of that collateral property <strong>and</strong> sell it<br />
in order <strong>to</strong> cover some or all of the original loan amount.<br />
Features of secured personal loans<br />
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To avail a secured personal loan own has <strong>to</strong> produce the title of ownership of<br />
the asset (s), which will be used as collateral.<br />
One can get a lower interest rate as compared <strong>to</strong> unsecured personal loans.<br />
<strong>The</strong> repayment process of a secured loan is more flexible than a regular loan.<br />
One can choose the kind of interest rate i.e. fixed interest rate or floating<br />
interest rate.<br />
One can avail a secured loan with a low credit score.<br />
Faster loan approval is the next feature of a secured personal loan.<br />
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No guaran<strong>to</strong>r is required for a secured loan.<br />
A secured loan is a very good way <strong>to</strong> improve credit score. Taking a secured<br />
loan <strong>and</strong> repaying the same makes the credit score of the borrower go high.
Eligibility criteria for a secured loan<br />
Just like any other loan, one has <strong>to</strong> fulfill some of the criteria determined by the<br />
lender <strong>to</strong> avail a secured loan.<br />
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One must have assets which he can use for the security of the loan. <strong>The</strong><br />
market value of the asset must be more than the value of the loan required.<br />
<strong>The</strong> minimum age of availing a loan is 18 years.<br />
<strong>The</strong> applicant must a citizen of India.<br />
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<strong>The</strong> income of the loan seeker is also checked as the income only determines<br />
the repayment capacity of the borrower.<br />
Types of secured loans<br />
As mentioned above, all personal loans are the multipurpose loan. On the basis<br />
of the collateral, there are different types of secured loans. Here are the <strong>to</strong>p 4<br />
types of secured loans.<br />
Loan Against Property– A loan against property is the highest availed secured<br />
loan. One can collateralize their residential, rental or commercial property<br />
against the loan. While availing this type of loan, one has <strong>to</strong> submit the title<br />
deed of the property <strong>to</strong> the lender. But it doesn’t mean that they cannot use the<br />
property. <strong>The</strong> property can still be used by the borrower. <strong>The</strong> highest loan<br />
amount will be 60% <strong>to</strong> 70% of the property value.<br />
Home Equity Line Of Credit– A home equity loan is a secured loan which is<br />
taken by keeping the equity or the share of the borrower’s home as collateral<br />
even when the home loan repayment is still going on. With Every EMI some<br />
amount of principal is paid. So the principal amount which is already paid <strong>and</strong><br />
the down payment of the home <strong>to</strong>gether forms the equity or the share of the<br />
borrower on that asset.
Loan Against Your Lien Free Car– If your car is a lien free or When the loan<br />
on the car is paid off, you can use the car as a security of the loan. <strong>The</strong> highest<br />
loan amount will be decided by the lender by evaluating the value of the<br />
car. Just like a Loan against property, one can use the car normally. Only the<br />
ownership documents will be with the lender. Once you will pay off the loan,<br />
the lender will h<strong>and</strong> you over the documents.<br />
Gold Loan– A gold loan is the cheapest secured loan. Availing a gold loan is<br />
even very easy. But unlike the above-mentioned loans, one has <strong>to</strong> keep your<br />
gold whether an ornament or a bar with the lender. You can have your gold<br />
back only when you will repay the loan in full.<br />
<strong>Unsecured</strong> <strong>Personal</strong> Loan<br />
<strong>Unsecured</strong> personal loans are the credit which is multipurpose as well as<br />
provided without any collateral. Such type of loan is granted <strong>to</strong> the applicant<br />
only on the basis of the repayment capacity <strong>and</strong> the credit his<strong>to</strong>ry. One can take<br />
an unsecured personal loan of a small amount like INR 50,000 <strong>to</strong> the maximum<br />
of INR 15 Lakhs. <strong>The</strong> loan amount depends on the repayment capacity of the<br />
applicant. An unsecured loan is of two types i.e.- Conventional <strong>Personal</strong><br />
loan & Online personal loan.<br />
Conventional <strong>Personal</strong> Loan<br />
A conventional personal loan is where the loan process goes manually. It means<br />
you are <strong>to</strong> go the lender, fill up the loan application, submit the documents, sign<br />
in various documents <strong>and</strong> wait a few days <strong>to</strong> get a response from the bank. This<br />
is the traditional way <strong>to</strong> apply for a personal loan.
Online <strong>Personal</strong> Loan<br />
An online loan is the upgraded version of a conventional personal loan. <strong>Loans</strong><br />
online are considered better as they are faster <strong>and</strong> more convenient for both the<br />
lender <strong>and</strong> the borrower. Each <strong>and</strong> every process of the loan is done online<br />
which saves much time <strong>and</strong> effort of both parties. Such loans are generally<br />
disbursed within a day which makes it better known as same day loans. Such<br />
urgent personal loans are best <strong>to</strong> fight emergencies when money matters a lot.<br />
<strong>The</strong>re are various types of online loans which a person can avail in India.<br />
Types of unsecured loans<br />
Medical Loan– One can avail a personal loan for medical procedures like a<br />
surgery, operation, therapy, procedure, etc. Such loans can be availed by the<br />
close relatives of the person who needs a medical assistance. ICICI Bank,<br />
HDFC Bank <strong>and</strong> AXIS Bank are some of the renowned banks that grant a<br />
medical personal loan.<br />
Festival Loan– Festival loans are taken for celebrating a festival. Such loans<br />
are easy <strong>to</strong> avail <strong>and</strong> can be even small amounts like Rs.50,000.<br />
Travel Loan– Travel loans are the next type of instant loans which is taken for<br />
a travel. With the aid of an instant loan, one can have a travel whenever he/she<br />
wants. Such loans are easy <strong>to</strong> repay as as one can opt for a tenure of 2 years<br />
which makes the EMI smaller.<br />
Home Renovation Loan– A personal loan can be taken <strong>to</strong> renovate your home.<br />
<strong>The</strong> good news about a home renovation personal loan is that such loans are tax<br />
free. One can avail a tax exemption if a personal loan is used in purchasing or<br />
renovating a h ome.
Line Of Credit– A line of credit is a way of availing a personal loan of very<br />
small amount i.e. Rs 5000. This is a kind of credit card where you will get a<br />
maximum amount which you can avail. One can use that particular amount in<br />
many parts whenever required.<br />
Business Start-Up Loan– A personal loan is the best way <strong>to</strong> avail fund for a<br />
start up business as availing a business loan at the initial stage of business is<br />
near <strong>to</strong> impossible. <strong>The</strong> lenders ask for a minimum of two years turn over report<br />
in order <strong>to</strong> grant a business loan. One can avail a personal loan <strong>and</strong> start a<br />
business.<br />
Corporate Loan– A corporate loan is taken by the persons who are in business<br />
for a quite long time <strong>and</strong> want <strong>to</strong> exp<strong>and</strong> their business. Such loan amount can<br />
be used for purchasing inven<strong>to</strong>ry, working capital or any other kind of use in<br />
business.<br />
Debt Consolidation Loan– A debt consolidation is a kind of loan which taken<br />
<strong>to</strong> pay off other loans. It happens many a time that a person has a number of<br />
small loans <strong>and</strong> credit cards which he/she is <strong>to</strong> maintain every month. A debt<br />
consolidation personal loan is a loan which is equal <strong>to</strong> the <strong>to</strong>tal outst<strong>and</strong>ing<br />
amount. By availing such loans, a person closes multiple credit accounts <strong>and</strong><br />
run a single account which is much better <strong>to</strong> h<strong>and</strong>le.<br />
A personal loan in one day can be availed from different such lenders such as a<br />
bank or an NBFC. But every lender has some eligibility criteria which one has<br />
<strong>to</strong> satisfy in order <strong>to</strong> avail a loan. Here are the general eligibility criteria for a<br />
speedy personal loan online approval.
Eligibility Criteria for an Instant <strong>Personal</strong> Loan<br />
Age– Age is the first checklist of the lender. One can avail an insta loan only if<br />
the applicant is between 21 <strong>to</strong> 60 years old.<br />
Income- <strong>The</strong> income of the applicant is also checked as this is the way how a<br />
lender determines the highest lending amount <strong>and</strong> the repayment capacity. <strong>The</strong><br />
minimum income should be ₹25,000 for salaried persons <strong>to</strong> avail a personal<br />
loan online.<br />
Employment– <strong>The</strong> duration of the employment is the next criterion of personal<br />
loan eligibility. A salaried person must be employed for the minimum of 2 years<br />
<strong>and</strong> a self employed person must have a record of earning at least for 5 years.<br />
Credit Score– Generally a credit score of 750 is considered as eligible for a<br />
personal loan. But if you apply the same from the NBFCs like Finance<br />
Budhha, a person who is new <strong>to</strong> credit can also avail a personal loan. When<br />
you are new <strong>to</strong> credit, your credit score will be 0(zero). In such scenarios,<br />
NBFCs work better than banks in terms of availing a loan.<br />
<strong>The</strong> List of Supporting Documents Required for a <strong>Personal</strong> Loan<br />
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2 passport size pho<strong>to</strong>graphs.<br />
Identity proof: (passport, voters ID, driving license or pan card).<br />
Address proof: (lease agreement, less than 3 months old utility bill or<br />
passport).<br />
Last 3 months’ Bank statements.<br />
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Latest 3 months’ salary slip<br />
Documents <strong>to</strong> prove the business existence in case of self employed applicants.<br />
<strong>The</strong> Bot<strong>to</strong>m Line<br />
A personal loan is considered as a boon for the ones who are in an urgent need<br />
of fund. Such loans are easy <strong>to</strong> avail <strong>and</strong> can be fit for any kind of use.