Concept of Secured & Unsecured Personal Loans

In India, the person can get funds from banks or financial institutions for their day to day expenses as well as personal needs, i.e. personal loan. The person can use this fund for any of their purposes, such as wedding expenses, higher education, purchase of consumer durable goods, initiating new business, medical emergency, purchase of jewellery, travelling expenses etc. Even the person does not have to tell to the bank; for availing the personal loan. The loan process is quick and easy, as it requires minimal documents. The person can avail personal loan in two forms such as secured or unsecured loan.

Secured Personal Loan

As the name suggest itself, that the person can avail loan only, if the customer provides security, otherwise person will not get a loan for fulfilling their requirement. The person wants a loan above of Rs.15lacs; then person does have to take secured personal loan. The person can provide their asset, securities, investments or property as collateral. The bank provides this loan for the longer tenure and even for the low interest rate. This loan can also be avail by the person who has low or poor credit score. This is so; the bank can take hold of customer’s property, in case the customer defaults in loan repayment. However, bank provides loan at slightly higher rate, than from the customers whose credit score is satisfactory.

Unsecured Personal Loans

In this loan, the person can avail this loan without providing collateral or security. This means the person does not have to provide their asset, investments or property as collateral to the lender. The banks provide this loan at little higher rate, i.e. 14 to 25%. This is because; the risk of lending is high. Therefore, bank provides this loan top the customer who has satisfactory or excellent credit history. Even the bank provides this loan for shorter tenure, i.e. 1 to 5 years. The person can take this loan even for the small amount, i.e. Rs.50000 and also for a large amount, i.e. Rs.15lacs. The bank checks the person’s credit worthiness and their profile through customer documents. The person has to submit various documents that are: residential proof, income proof, age proof, employment details, identity proof and bank statement.

Therefore, person should be cautious while availing personal loan regarding their documents and credit report.