In today’s time of raised standard of living and globalization, there are many financial needs for which people require quick and convenient credit. Unsecured loans are gaining popularity as great credit instruments and fierce competition in the financial sector has made the banks to ease the process of obtaining bank loans easily. Unsecured loans are the loans given on high-interest rate but without taking any collateral or security from the applicant or the borrower.
Eligibility Criteria to Obtain Unsecured Loan:
Every applicant has to meet certain criteria to obtain unsecured loans:
1. Your employment record should be stable. A regular employment record plays a vital role in making you eligible for the unsecured loan. Tenure differs from bank to bank. It can be a minimum of 2 years for the salaried person and 5 years for a self-employed person.
2. Age should be above 21 years and below 60 years, in the case of the employed person and between 25-65 for the self-employed person.
3. A credit score is also the very important aspect that is taken into consideration while determining the eligibility, rate of interest and loan amount.
4. Financial statements and pending EMIs are also crucial and plays an important role in determining loan eligibility.
Documentation Required for Unsecured Loans:
1. Duly filled the application form.
2. Address proof – Utility Bill or Passport etc.
3. Identity Proof – Passport, Pan Card, Driving Licence, Voters ID (anyone)
4. Passport size photographs
5. Salary slips from last 3-6 or more (differs from bank to bank)
1. Duly filled loan application form.
2. Office address proof and proof of continuity of business.
3. Processing fee cheque.
4. Passport size photographs.
5. Identity proof- passport, driving license, Pan Card, Voters ID, Aadhar Card (any one proof).
6. Proof of residence- utility bill, passport etc.
Unsecured Loan Interest Rates:
An interest rate is generally high in unsecured loan since it is sanctioned without any collateral or security submission. Banks negotiate interest rates on insecure loans with customers based on several parameters like annual income, employment status, loan amount, employer’s profile and so on. Unsecured loan’s interest rate varies from 17% – 24% (may vary) depending on the annual income or turnover of the company and several other factors mentioned above. The unsecured loan is taken for short-term financial needs or to build the good credit score. The term of the unsecured loan is shorter than the secured loan which is up to 5 years during which the borrower is expected to pay the full amount with interest.
To summarize unsecured loans have various features that are unique.
1. Convenient loan application.
2. Quick turnaround time.
3. Higher rate of interest.
4. No Collateral Security.
5. Higher the income, higher the loan amount.
6. Minimum documentation.