Important Difference Between Unsecured and Secured Loans
While lenders offer some loans in exchange of a high value asset, they also lend hefty sums without collateral. The former is called secured loans, where you have to pledge an asset like your home, car, and others. On the other hand, the latter is regarded as an unsecured loan where you don’t need to pledge anything in order to access a sanction. So, if you don’t want to endure the stress of pledging an asset or wait until it is verified by your lender if you are in a hurry, you can choose unsecured personal loans to address your financial requirements in time.
Is a secured or unsecured loan better? Before answering the question, it is important that you know both the types of loans inside out. This will help you avail the right type of sanction in order to meet a specific need and plan your repayment well in advance. Read on to know the distinguishing features of secured and unsecured loans.
Loan Amount
An unsecured loan offers a lower amount sanction when compared to a secured loan. This is because it is collateral-free and the lender assumes a higher risk in offering you the funds. On the other hand, a secured loan allows you to access high amounts, which varies basis the value of the asset you pledge. With a high-value asset at their disposal, the lender is likely to sanction a sum of Rs.50 lakh and upwards as loan against property, home loan, and others.
Loan Tenor
The tenor of an unsecured personal loan is usually shorter as compared to a secured loan. Generally, you need to repay an unsecured loan over a tenor of 12 to 60 months. This, in case of a secured loan, can go up to 25 or even 30 years. The tenor varies due to the loan amount you are offered.
Interest Rates
Lenders charge higher interest rates on unsecured loans as compared to secured loans. This again is because of the lack of security in case of the unsecured variant. However, if you qualify for an unsecured personal loans based on the lender’s eligibility criteria and have a good credit score, you can check your CIBIL score for free using online CIBIL score checker. then owing to your creditworthiness, you can bag a sanction at a lower interest rate.
Borrower’s Risk
As a borrower, you don’t assume much of a risk when you avail an unsecured loan because you haven’t pledged any collateral. However, when you avail a secured loan, you assume a higher risk of giving up your asset if you default on repayment.
Lender’s Right in Case of Default
Each type of loan meets different needs and has its own pros and cons. In case you default on your unsecured loan, the lender can initiate legal proceedings against you to recover his dues. On the contrary, in the case of a secured loan, the lender has a right to take possession of your asset.
After reading the aforementioned features you must be pondering is an unsecured loan good? Unsecured loans are more popular because of the fact that you don’t need to pledge collateral and hence assume a lower risk. Even so, when looking for a personal loan, apply with lenders that offer attractive loan features. For instance, a Bajaj Finserv Personal Loan offers high-value loan amount of up to Rs.25 lakh at affordable interest rates that you can repay in flexible tenors spanning across 12 to 60 months. Its simple eligibility criteria and minimal documentation make way for instant approval and quick disbursal within 24 hours.
In fact, you can also avail this loan as a flexi loan. Owing to this facility, you can borrow from your total sanction as and when a need arises and pay interest only on the amount utilised. Further, you can make part-prepayments through the tenor at no extra cost. Moreover, you also have a choice to pay interest-only EMIs and repay the principal when tenor ends. This helps you save up to 45% on EMIs and manage unpredictable financial needs with ease.
To avail this unsecured personal loan and benefit from customised deal, check your pre-approved offer online. Simply enter your name and contact number to enjoy instant approval.