Unsecured Loans
Unsecured loan is a loan provided to such borrowers who do not have any property or collateral to offer in lieu of loan as is the case with secured loan. These borrowers need not pledge any house or any other property to avail loan. Even if their credit history is bad, they can avail personal loan. These loans are availed for short term financial need like wedding, education, vehicle purchase, vacation, etc. The duration of these loans is short as there is no collateral and the interest rate is high as compared to secured loan.
Though no collateral is required to avail unsecured loan, the lender generally satisfies himself regarding credit worthiness of the borrower by analyzing credit history of the borrower. This type of loan is generally availed by students, salary earner, middle class citizens and all those who do not have any movable asset to pledge. The borrower must keep certain points in mind while opting for unsecured loan.
- The need for the loan should be short-term.
- There is no need to provide any security, but the lender will always check repaying capacity.
- Such loans have very high rate of interest as these are not secured and the lender takes considerable risk in approving such loans.
- A borrower must check lender’s background and have first hand knowledge about track record of the lender.
- Process of availing unsecured loan is easy as there is no need to pledge any property and the lender need not spend time inspecting the property or asset as it is the case in secured loan.
