Loans are often associated with securities. Many individuals are not aware that there are various loans that they can take up without placing any security or collateral. For instance, personal loans. Taking up a personal loan is a big decision. You must avail the loan after understanding the requirements and commitments. Here in this blog, you will learn how to select the best security-free personal loan –
Understand the basics –
An extremely common mistake made by many is to read the abstract or 2 about personal loans and proceed toward the institution providing the lowest interest rate. This move creates a lot of concern once your EMI meter begins. Here are the basics you must know.
Note: Lowest personal loan interest rate is often provided by the PSUs (public sector units) like the SBI personal loan, Punjab National Bank, Indian Bank, Bank of India, Bank of Maharashtra, Bank of Baroda etc. However, you must not straightaway rush to any lender whom you believe is offering the lowest rate. SBI personal loan EMI calculator must be used for calculating the SBI personal loan EMI or EMI of any other lender.
What is meant by a personal loan?
When any group of individuals or individual undertakes a particular amount of money from a lender, it is called a personal loan. Borrowers repay the borrowed loan in EMIs (equated monthly instalments) called EMI. Borrowers should repay the proceed in a number of months, called tenure. This is a borrowing financial instrument that permits you to access funds for the repayment tenures ranging between 1 and 5 years.
What is meant by collateral?
When any borrower approaches a lending financial institution for availing loan, they need the borrower to place that asset as security or collateral. Property, gold, business, and fixed deposit are a few collateral options. Lending institutions basically reserve the right to sell off the collateral or security to recover the unpaid dues. This sounds scary, but it isn’t. In case borrowers are unable to repay the loan EMI by the due date, the lending institution will return ownership and papers to the borrower. But searching for a loan that doesn’t require security or collateral is a great idea that must be explored.
Availing of a personal loan with zero collateral
Availing of a security-free personal loan is a simple task. However, it is crucial to know – what must you do and, more necessarily, the important steps to adopt.
What must you do when you require a personal loan with zero collateral or security?
Meet lender’s eligibility criteria: Each lending institution has its own eligibility criteria that you must meet. Below mentioned are 5 basic eligibility criteria that you must know:
Age: Know about the minimum age at the time of availing of a personal loan and the maximum age during loan maturity.
Work experience: Know about the work experience requirement.
Citizenship: Borrower’s citizenship decides the approval of the personal loan application.
Monthly income: The debt-to-income ratio and borrower’s expenditures are looked upon when evaluating any application.
Employer Category: The eligibility parameter for availing of a personal loan with zero security varies for self-employed and salaried individuals like chartered accountants, doctors, secretaries, and companies.
Ensuring all documents are placed: Every online loan application lists the documents required for the borrowers to be uploaded. Thus, to avail of a security-free personal loan, mentioned here are the documents required for submission.
∙ KYC – KYC (Know Your Customer) is a necessary requirement that NBFCs and banks are required to assess before approving the loan.
∙ Address proof: Residential proof to assess the borrower’s veracity. It is used to assess citizenship and necessary documents like Voter ID, PAN, and Aadhaar Card.
∙ Income proof: As stated before, monthly income decides eligibility. Thus, the lenders will ask for income proof.
∙ Employment proof: Salaried individuals can place in the salary slips for 3 to 6 months. On the contrary, experts can submit bank statements.
∙ Meeting the requirement of credit score: A most crucial aspect of a personal loan is a credit score. It is the score provided by the credit bureau such as CIBIL. Listed here are the major components of credit score.
✔ What are the impacts on a score – A credit score is a score for every credit-linked financial transaction. If the borrower delays or misses out on its financial commitment, the credit score lowers.
✔ What is the credit score range – Credit score generally ranges between 300 and 800. A credit score of over 750 is looked upon as good, allowing lenders to approve the loan with zero security or collateral.
✔ Can credit score be ameliorated – When an individual becomes financially disciplined and ensures all the dues are repaid, the credit score can be ameliorated.
✔ Who can view the credit score? – Lenders can view the credit score when assessing a personal loan application.
Steps to adopt to avail of personal loan with zero security or collateral
Every lender comes with an internal procedure to follow when availing of a personal loan. However, digital lenders have made the procedure hassle-free and extremely simple. Here’s all you must know:
Decide the loan proceed: Are you looking for a personal loan to finance your medical expenditures, wedding, travelling, or buying an item. Decide the loan proceeds you require.
Check out your personal loan eligibility: This aspect is already explained above. Placing a personal loan application without mitigating the personal loan eligibility parameter will result in rejection and negatively affect the credit score.
Collect the document: Even when placing an application for an online personal loan, it is crucial to collect all important documents in the necessary format when uploading.
Compute the loan EMI: Use the SBI Personal Loan EMI calculator to decide the monthly instalment. It is a completely free instrument that borrowers use various times to compute their repayment tenure.
Fill up the application form: Filling up the application is not sufficient. It is necessary to fill up all the data accurately to make the verification procedure seamless.
Place the application: Never forget to submit the personal loan application. After you have submitted it, you will get a tracking number.
Just wait for the confirmation: In case the lending institution approves a personal loan, the borrower gets the message. Once the application is accepted, the funds are disbursed to the account of the borrower.
To sum this up:
Borrowers can simply avail of a personal loan without any security or collateral if they mitigate the parameter and consider the consequences of not meeting debt commitments. Ensure to take adequate time and do not overborrow. Also, recommend you not to under borrow as you may again go for a personal loan.