If you are in dire need of money, then approaching a financial institution like a bank to get a loan will be among the generous choices. Also known as a loan, it is an agreement that clearly speaks about the fact that the borrower will be able to repay the amount including the rate of interest charged. We are pretty much familiar with this process but, have you ever heard of unsecured personal loans? No! Here it is….

What are Unsecured Personal Loans all about?

Seems surprising by the name! We will clear every doubt. Unsecured personal loans refer to personal loans that get an extension without any underlying collateral. The terms and conditions for approval, disbursement, and sanctioning are dependent on the credit score of the borrowers. Afterward, it must be paid back in the form of EMIs.

In other words, if you are a borrower, then you must possess a high credit score for getting approval for the secured loan. But there are times when borrowers suffer from low credit scores. In such a situation, unsecured loans are applied where lenders insist co-signers for undertaking legal obligations for fulfilling the debt if the borrower becomes a defaulter.

The overall purpose associated with unsecured loans is to fulfill the requisite need for money in an emergency. As clear by the name, unsecured personal loans are generally taken for meeting personal purposes like house renovation, etc.

Some Exclusive Features of Unsecured Personal Loans

After getting an insight into the concept of unsecured personal loans, why not peep into some of the exclusive features associated with the same? Some key features associated with this particular type of loan include the following:

 1. Zero presence of collateral: Collateral refers to a safe option that gets leverage by the lender at the time of extending the funds to the borrower. In the case of an unsecured personal loan, hardly any collateral is needed. If the borrower becomes a defaulter, then the lender will consider it a bad debt.

2. High rate of interest: As unsecured personal loans increase the risk of the lenders significantly, the rate of interest charged also goes high. It will prevent the lender from incurring loss to a certain extent in case the borrower becomes a defaulter.

3. Zero tax benefit: An unsecured personal loan provides zero benefits in terms of tax. Unlike secured loans like car loans, you cannot expect to come across the same benefit by getting your unsecured loan approved.

4. Low amount of loan: In the case of a secured loan and a good CIBIL score, the lender will be able to sanction a good amount of money as a loan. But unsecured personal loans on the other hand are specifically designed to grant to people having a bad credit score. Thus, borrowers will be sanctioned only a small amount of money in case of an unsecured loan as the bank does not want to take any risk.

5. Short terms regarding payment: Overall, the terms related to payment of an unsecured loan are lower than secured loans. They range up to a time limit of five years. Also, there is hardly any flexible term permitted at the time of repayment of the loan amount.

Conclusion:

To meet any emergency need, unsecured personal loans are the best approach. Getting a loan is easy even if you have a bad credit score. Else, the financial institution may extend the time with a high rate of interest too. In some cases, a guarantor may also be required for approval of the same. Moreover, vailing this particular loan will allow improving the credit score by paying the debt within the stipulated time.