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Unsecured Loan 

Financial institutions provide an unsecured loan in the form of personal loans without insisting on collateral security. You can simplify the loan process with MyMoneyMantra. Read on to understand the features, types of unsecured loans and unsecured loan interest rate.

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Unsecured Personal Loan

A loan that does not require security backup is an unsecured loan. An unsecured loan can be availed in the form of personal loans that can be used for various purposes and can be repaid in easy instalments. The eligibility criteria and documentation are not extensive for an unsecured personal loan. The loan can be availed by submitting an online application along with the required documents. With a quick turnaround time, an unsecured personal loan can be the best solution for instant funds requirements.

What is an Unsecured Loan?

A loan offered without any security is an unsecured loan. These are loans with high risk as there will the lender will not have any recourse in case of default. That is the reason unsecured loans are provided only to individuals/professionals with a good credit rating that indicates their creditworthiness and responsibility towards paying up debts promptly. 

A regular income is another criterion that is insisted on to ensure repayment capacity. The addition of a co-applicant will further enhance the chances of approval of the unsecured loan. However, the unsecured personal loan interest rate is much higher than the interest of secured loans

Features and Benefits of Unsecured Loans

Unsecured loans are quick loans that can be availed without the hassle of providing collateral security. 

Key Features

  • Purpose: The loan can be availed for any purpose. The utility aspect is versatile without any restrictions. It could be to pay off an existing debt obligation, for education expenses of your children, to plan a vacation, for wedding expenses, to meet medical emergencies and many more.
  • Quantum: The quantum depends on the purpose as well as the income. It could range from Rs. 10000/- to Rs. 40.00 lakhs. Generally, the quantum will be lower compared to secured loans as the risk involved is higher. Some of the lenders consider providing higher amounts if the income of the applicant is satisfactory and the credit score is beyond the required level.
  • Repayment: Unsecured loan has a shorter repayment tenure ranging from 12 months to 60 months.
  • Rate of interest: An unsecured personal loan interest rate will be higher than the secured loans and will be between 8.60% to 21% p.a. The interest will be charged depending on the income, credit score, occupation and tenure.
  • Security: The most attractive feature of an unsecured loan is the security aspect. An unsecured loan does not require security backup.
  • Credit Score: The minimum credit score required to qualify for an unsecured personal loan is 750 and above.

Benefits of unsecured loans

  • No collateral security
  • Quick turnaround time
  • Flexible repayment option
  • Simple documentation
  • Quantum commensurate to income. The higher the income, the higher will be the quantum and vice versa.

Types of unsecured loans

There are various types of unsecured loans. Unsecured loans can either be revolving loans or term loans. Revolving loans are normally extended to run businesses. The different types of unsecured loans are as given below:

Unsecured personal loan: 

This loan can be used to meet urgent financial requirements. This loan is very convenient as it can be utilised for any purpose without providing proof of end-use. Approval of an unsecured loan is only on the basis of the creditworthiness of the applicant and their past loan repayment history.

A simple online application can fetch you funds ranging from Rs. 10000/- to Rs. 40.00 lakhs depending on the income level and credit score. Some of the lenders provide pre-approved personal loans to eligible customers that will be instantly credited to their account on placing a request. Flexible repayment terms make an unsecured personal loan the most sought after solution for instant funds requirements. The interest on unsecured loan will be greater than that of a secured loan owing to the risk involved

Education Loan:

Banks provide unsecured education loan to students for higher studies. Education loans up to Rs. 7.50 lakhs will be provided without any collateral security. However, the inclusion of parents/guardians as co-borrowers will be mandatory. 

The expenses covered under education loans are -

  • Course fee
  • Travel expenses for studies abroad
  • Examination fee/laboratory fee/library fee
  • Purchase of books/equipment/uniform. Purchase of a computer is permitted wherever it is required.
  • Cost of study tours/projects etc. that is a part of the course.

A maximum repayment period of 15 years, excluding the course term and moratorium period of 12 months, will be permitted. If the interest is serviced periodically, the repayment will be set for the principal amount.

Credit Card: The preset limit based on the income and credit score is an unsecured loan that can be either repaid in full or part up to the amount utilised. The interest will be charged only to the extent of utilisation.

For individuals who have opted for revolving payment, this unsecured loan can prove very expensive as the interest charged on the balance will be as high as 3.5% pm. A zero interest facility is provided for 45 to 50 days from the date of usage of the limit, which will be beneficial if you make the payment of the entire liability without carrying on any balance for the next billing cycle.

Revolving limit: This facility will be beneficial for businessmen to meet working capital requirements like procurement of raw materials, meet administrative expenses, and any other regular overheads that are business-related. This unsecured loan will be in the form of an overdraft with a preset limit considering the annual business income.

Sales proceeds credited to the account will bring down the liability. The limit will be restored to the extent of credit received and will be available for utilisation again. The advantage of paying the interest on the amount utilised and not on the limit sanctioned makes this facility a feasible option for businessmen.

Unsecured Personal Loans from Top Banks

Here are the key highlights of banks providing unsecured loans. You can avail of unsecured personal loans from any of the top banks listed below.

ICICI Bank

PurposeMultipurpose loan without any end-use restriction
QuantumOption to choose the amount from Rs. 50000/- to Rs. 25.00 lakhs as per the requirement.
Rate of interestAffordable interest rate starting from 10.90% p.a.
RepaymentThe loan can be repaid within 1 year to 6 years
DocumentationMinimal
Application processBoth online as well as offline 

Axis Bank

PurposeFor planning a vacation, for wedding expenses, for medical emergencies, for education expenses, for purchase of home gadgets, for taking an existing business to the next level etc
QuantumRanging from Rs.50000 to Rs. 15.00 lakhs 
Rate of interest12% to 21% p.a.
RepaymentCan be repaid within a minimum of 12 months and a maximum of 60 months
DocumentationNot extensive
Application processIt can be applied online or offline by visiting the nearest branch

SBI

PurposeSBI permits utilization of the unsecured personal loan for plenty of purposes like meeting medical expenses, renovation of your existing house, education expenses of self or children, wedding expenses, planning a dream vacation, etc
Types of unsecured personal loans

The different types of unsecured personal loans offered by SBI are

SBI Pension Loan for pensioners

SBI Xpress Credit for salaried individuals having salary account with SBI

Pre-approved Personal Loan for existing customers

SBI Quick Personal Loan for salaried individuals not having salary account with SBI

Quantum

For SBI Pension Loan: Between Rs. 2.50 lakhs to 14 lakhs depending on the age and type of pension

For Xpress Credit: Up to Rs. 20.00 lakhs

For Pre-approved Personal Loan: As per the track record

For Quick Personal Loan: Up to Rs. 20.00 lakhs

Rate of Interest10% to 15.65% p.a.
RepaymentRanging from 6 months to 72 months
DocumentationSimple
Application processBoth online and offline applications are accepted

Kotak Bank

PurposeThe key feature of the unsecured personal loan is the unrestricted usage option. It can be availed and utilised as per individual requirement 
QuantumUp to Rs. 30.00 lakhs
Rate of Interest10.50% to 18% p.a.
RepaymentFlexible repayment terms between 12 months and 60 months
DocumentationNo elaborate documentation. Simple and hassle-free
Application processThe loan application can be submitted online or can be submitted offline by visiting the nearest branch.

HDFC Bank

PurposeAn unsecured personal loan is an ideal credit facility as it can facilitate any urgent financial requirement. The advantage of a personal loan is the multiple usage options.
QuantumUp to Rs. 30.00 lakhs
Rate of interestStarts at 10.75% and goes up to 20% p.a.
RepaymentThe loan is to be repaid along with interest within 72 months
DocumentationSimple documentation
Application processAn easy application process that can be either online or offline

Difference between secured and unsecured loan

You can get insight into secured vs unsecured loans with the points listed below.

Secured LoanUnsecured Loan
The loan amount will be higher and in tune with the value of the security offered.A maximum of Rs.3 lakhs to Rs. 40.00 lakhs depending on the lender.
The Personal Loan Rate of Interest will be competitive and affordable.The risk attached to unsecured debt is higher. So the interest on unsecured loan will be higher than the interest on secured loans
Longer repayment tenure up to 30 yearsThe maximum repayment period will be five years to 6 years depending on the lender.
Elaborate documentationSimple documentation
Approval and disbursement will take a longer time.A maximum of 48 hours and instant disbursal in the case of pre-approved loans.
Home loans, Gold loans, vehicle loans, loans against fixed deposits or LIC policies etc., are secured loans.Personal loans, student loans, revolving loans and credit cards are unsecured loans.

Unsecured Loans Eligibility Criteria

The eligibility criteria stipulated for unsecured loans are as given below:

  • The age of the applicant should be between 21 years to 65 years, except for student loans where the age can be below 21 years.
  • The minimum monthly income required will be between Rs. 15000/- to Rs. 40000/- depending on the lender.
  • The loan will be provided for both salaried as well as self-employed individuals, people in business and professionals.
  • Salaried individuals should have an overall minimum working experience of 3 years and a minimum experience of a year with the existing employer.
  • Self-employed individuals/businessmen should have been in the existing business for a minimum of 3 years.
  • A minimum credit score of 750 is required.

Unsecured Loans Document Required

The documents listed below should be submitted along with the application for unsecured loans.

KYC documents:

Aadhar card, Voter’s ID Card, Passport, Driving Licence, Utility Bills

Photo ID Proof:

PAN Card, Passport, Driving Licence, Aadhar Card

Income Proof for Salaried Individuals:

  • Salary slips for the last three months
  • Latest IT Returns
  • Latest Form 16
  • Bank account statement for the last 6 months

Income Proof for the Self-employed:

  • Audited balance sheet and profit and loss account for the last three years
  • IT returns with income computation for the last three years.
  • GST Registration Certificate
  • Memorandum of Understanding, Articles of Association, Certificate of Incorporation, Partnership Deed etc., depending on the constitution of the business.

Additional documents for Students Loan

  • Marks sheet of SSLC, HSC and Degree courses
  • Copy of Admission Letter
  • Schedule of Course Fees

Navi Personal Loan @9.9% p.a

Now get Navi personal loan of Rs. 10,000 to Rs. 20 Lakhs at lowest interest rate starting from just 9.9% per annum. Repay in easy instalments of 3 to 72 months. The processing fee ranges from 2.5% to 6% of the sanctioned limit + GST.

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Unsecured Personal Loan FAQs

Who can avail Unsecured Loan?

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An unsecured loan can be availed by salaried/self-employed individuals, self-employed/salaried professionals, businessmen and students.

What is an example of an unsecured loan?

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Personal loans, Credit Cards, Student Loans, Revolving Loans(Overdraft facilities) are examples of unsecured loans.

How much can you borrow unsecured?

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The quantum of unsecured loans is need-based. You can borrow as low as Rs. 10000/- and up to a maximum of Rs. 40.00 lakhs depending on your requirement and income level.

What is the interest rate on an unsecured loan?

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The interest rate on an unsecured loan differs from lender to lender. It can be between 8.60% to 21% p.a.

Is a mortgage an unsecured loan?

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Unsecured loans are loans without security backup, so a mortgage is not an unsecured loan.

Why do banks offer unsecured loans?

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Banks offer unsecured loans to facilitate hassle-free and quick solutions to the instant financial requirements of the applicants. Most applicants look for a loan that can be availed without putting their assets at risk and for a shorter tenure. To make this possible, banks provide unsecured personal loans to creditworthy applicants with a regular source of income and a good credit rating.

What is the maximum loan amount you can get in an Unsecured loan?

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The maximum amount you can get in an unsecured loan can vary between rs. 3.00 lakhs to Rs. 40.00 lakhs depending on the lender.