Unsecured Loan

There are many lenders in the country that offer unsecured loans to their customers. There are many top banks that offer personal loans and commercial loans to customers. There are also many other lenders who provide salary advance or instant loans to customers on a short-term basis. Let’s take a look at some of the top lenders in India who provide unsecured loans to customers.

Unsecured Personal Loans from Top Banks

1. HDFC Bank

HDFC is one of the biggest private lenders in the country. The transparent process in offering loans helps customers with easy access to personal loans.

Benefits

• Loan disbursal within just 10 seconds for pre-approved customers.
• Loan disbursal within 4 hours for other customers.
• Optional insurance coverage for customers.
• Hassle-free application process.

2. Yes Bank

Yes Bank has a diverse range of loans in its line-up. The personal loan offered by the bank comes with flexible terms for the benefit of customers.

Benefits

• Repayment tenure ranging from 12 months to 60 months.
• Speed and hassle-free application process.
• Option for transferring existing loans (with high interest) from other banks to Yes Bank.

3. IDFC First

Capital First is one of the major financial institutions that offers loans to small and medium enterprises in India. The personal loan offered by the company comes with the following terms:

Benefits

• Flexible repayment tenure of up to 60 months.
• Online approval in just 2 minutes.
• Hassle-free loan application process.

Unsecured Instant loans/Advance salary loans

1. EarlySalary

EarlySalary is a financial service provider that offers instant loans with 100% paperless approval. The mobile application of the company can be used to get loans and keep track of the repayments.

Benefits

• Hassle-free application process.
• Special loans for children’s school fees and shopping needs.
• Loan approval and disbursal within a few hours of application.
• Flexible repayment process.

2. Loan Tap

The instant loans offered by Loan Tap comes with flexible benefits. Customers can get a maximum loan amount up to 2.5 times their monthly salary with minimal processing time.

Benefits

• Repayment tenure between 3 months and 12 months.
• Hassle-free online application process.
• Instant loan disbursal within just 24 to 36 hours of application.

3. Quick Credit

The instant loans offered by Quick Credit are disbursed within a matter of a few hours. The application process is hassle-free with minimal documentation. Customers can use the loan amount for any emergency financial requirements.

Benefits

• Up to 30 days of repayment tenure.
• 100% paperless verification.
• Loan disbursal within an hour.

4. Flexsalary

Flexsalary is one of the digital finance service providers in the country. Customers can get easy access to instant loans for various needs including emergency medical expenses, marriage, home renovation, etc.

Benefits

• Reasonable interest rate.
• Open-ended loan tenure.
• Easy documentation.

How to Apply for Unsecured Loans?

• Company website: Almost all the top lenders in the market now provide their services through their websites. You can visit the official website of the bank and apply for a loan with your credentials.
• Loan aggregators: There are third-party loan aggregators like Bankbazaar that can help you find the best deals available in the market. Here, you can compare the different loan products and choose the best product that suits your specific needs. In this way, you can check the interest rates and processing fees of different lenders before making a final decision.
• Branch office: You may also visit the lender’s branch office and apply for a loan. With the advent of the internet, this is not the most popular choice among today’s borrowers. However, if you are not internet savvy, you may use this option to apply for a loan.

Factors Influencing Approval of Unsecured Loans

A bank or an NBFC will assess certain key aspects before deciding to give you a loan and which includes your income, credit history, job status, etc.

• Credit history: Your lender will take a look at your previous credit behaviour in order to understand your repayment ability. They like to make sure that their borrowers are financially disciplined enough to repay loans efficiently. With a high credit score, you have more chances of getting your unsecured loan application approved.
• Income: Lenders typically check your income to get an idea if you will be able to repay conveniently. Many lenders set a minimum income criterion to make sure that individuals with low income do not apply for their loans. You will be asked to provide documents such as latest payslips, offer letter, income tax returns, and bank statements to verify your income details.
• Employment status: Your lender will be interested in knowing if you are a salaried employee or a self-employed applicant. They would also like to know if you have a steady source of income on a monthly basis. If you are a salaried applicant, you would have to provide your offer letter from your current organisation, relieving letter from your previous company, payslips, etc. to verify your job status. If you are a self-employed individual, you will most likely be asked to show proof of continuity of business and proof of business ownership.

Features and Benefits of Unsecured Loans

• Easy and convenient loan application: Unsecured loans generally have an extremely easy and convenient application process. Customers are not required to visit the branch of the lending bank frequently to avail this type of loan. These loans are also available through online application and are very easy to avail.
• Quick turnaround time: Banks offer quick and speedy turnaround time on unsecured loan applications. These loan applications are processed fast and sometimes even under 24 hours. This makes unsecured loans an extremely handy financial tool in times of an emergency monetary crisis.
• High Rate of interest: Since borrowers do not need to provide any collateral to avail an unsecured loan, these loans are offered at a higher rate of interest than other regular loans. The interest rate on these loans also depends on the monthly or annual income of the loan applicant.
• No collateral required: Customers do not need to submit any collateral as security to the lending bank to avail unsecured loans. Your assets are safe with you in case you fail to repay this type of a loan. Due to this unique feature, unsecured loans are becoming increasingly popular among customers.
• Higher the income, the greater the loan amount: The more the income of the applicant, the higher will be the loan amount that banks offer as an unsecured loan. This means that a customer can avail unsecured loans in proportion to his or her monthly or yearly income.
• Minimum documentation: The documentation process is very minimal for unsecured loans. Most lenders now allow customers to submit these documents online, and the process has become completely paperless.

Eligibility Criteria for Unsecured Loans

• Applicant should be in a stable job. Regular employment record plays a vital role in making a customer eligible for unsecured loan
• Salaried individuals with a minimum 2 years of professional service or a self-employed person with a minimum 5 years of earning tenure
• Age of the applicant should be above 21 years and below 60 years for salaried borrowers, and between 25 and 65 years for self-employed individuals
• Current financial statements play a crucial role in determining loan eligibility, therefore, should be provided during the loan application process
• Credit history of customers is also taken into account and is instrumental in determining eligibility, rate of interest, and loan amount
• Pending EMIs from other loans are also taken into consideration by the lending bank for determining your loan amount eligibility

Documents Required to apply Unsecured Loans

Documents required for salaried applicants are:

• Duly filled loan application form
• Couple of passport-size photographs of loan borrower
• Identity proof – passport, driving license, voters ID, PAN card (any one proof)
• Proof of residence – utility bill, passport, etc.
• Salary slips for last 3 or last 6 months

Documents required for self-employed applicants are:

• Office address proof for self-employed individuals
• Proof of continuity of business
• Processing fee cheque
• Duly filled loan application form
• Couple of passport-size photographs of loan borrower
• Identity proof – passport, driving license, voters ID, PAN card (any one proof)
• Proof of residence – utility bill, passport, etc.
• Salary slips for last 3 or last 6 months

Types of Unsecured Loans in Available in India

• Signature loans: This is the simplest type of an unsecured loan. As the name suggests, you only need to give a signature for obtaining this loan. As a borrower, your signature will serve as the sole security for this loan wherein you will promise your lender to repay the entire loan on time without fail. You can acquire a signature loan from a bank or a non-banking financial company (NBFC). It is a loan that can be paid in instalments wherein you will have to pay back on a monthly basis until the debt is completely paid back.
• Personal loans: A personal loan is the most common type of unsecured loan. When you apply for a personal loan, you do not have to mention the reason for taking the loan. This is also an instalment loan wherein you repay the loan in equated monthly instalments (EMIs) over a fixed tenure. Both banks and NBFCs offer personal loans through online and offline methods.
• Education loans: An education loan or a student loan refers to a loan that can be utilised to pay your fees for an education course. The best feature of education loans is that one can enjoy a moratorium period during which a borrower does not have to pay anything. It is also known as a holiday period or a waiting period. A student applicant can also enjoy subsidies on interest rates and flexible repayment modes. These loans can be taken to pay hostel fees, library fees, mess fees, course fees, and other fees related to one’s academic course.
• Peer-to-peer loans: This type of loan is provided by an institution other than conventional lenders such as banks or NBFCs. You can take a loan from individuals or your peers. These loans typically follow a fixed-rate interest system. This is an easier form of obtaining loans. The eligibility requirements for peer-to-peer loans are less stringent. The rate of interest for these loans is competitive in nature.
• Instant loans: These are relatively small loans offered mostly to salaried professionals. A few companies in the market also provide these loans to self-employed professionals. Here, the loan will be repaid whenever the borrower gets his or her next salary or wages. The rates of interest charged for these loans are significantly higher than traditional loans.

Difference between Secured and Unsecured Personal Loans

FAQs on unsecured loans

What is Unsecured Loans?

Unsecured loans are loans that are not backed by any security or collateral. In case of a default, the lender cannot use any collateral to recover the loan amount from the borrower. Even if the borrower has assets and insurance policies in his/her name, the lender cannot use them to recover the loan amount. Hence, the risks associated with unsecured loans are significantly high for lenders.

Can a self-employed person take an unsecured loan?

Yes. Unsecured loans can be taken by self-employed customers too.

What is the maximum loan tenure offered on unsecured loans?

Most banks offer a maximum loan repayment period of 5 years for unsecured loans. However, this can vary from lender to lender. Therefore, it is advisable that borrowers of this kind of a loan should always learn about the maximum loan tenure offered by the lender before he or she decides to opt for this scheme.

What are the purposes for which unsecured loans can be availed?

Unsecured loans can be taken under two categories namely personal loans or business loans. An unsecured loan that is taken to meet any personal financial need like medical expense, house renovation, etc. is called a personal loan. Whereas, an unsecured loan sought for business purposes like expansion of business, payment of tender, etc. is called a business loan.

Can I apply for an unsecured loan online?

Yes. Many banks provide the option of online application of unsecured loans.

Do I need to pay a processing fee for unsecured loans?

Yes. Banks charge a processing fee for unsecured loans. This is generally dependent upon the discretion of the concerned bank. bank’s discretion.

How many days does a bank normally take to disburse an unsecured loan?

Unsecured loans are mostly granted faster than regular loans. Hence, loan processing may take a minimum of 24 hours to a maximum of 7 days depending on the bank.

Can I close an unsecured loan prematurely?

Yes. Unsecured loans, like other regular loans can be closed prematurely. However, this will depend upon the bank’s policy and may attract a pre-closure fee.

How can I make sure that my unsecured loan application gets approved?

Applicants can follow the steps mentioned below to ensure that their unsecured loan applications do not get rejected:

• Bills and existing loans should be paid on time to maintain a high credit score.
• In case a customer has a low credit score or has never applied for any credit before, he or she can build his/her credit score or enhance it over time.
• Individuals should ensure that their earnings match or exceed the minimum income criteria of the concerned lender before applying for an unsecured loan.
• Having a stable and regular source of income also increases the chances of an unsecured loan application getting approved.