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Advantages of Unsecured Loans Over Secured Loans

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Highlights

  • What benefits does an unsecured loan provide?
  • How does it fare to a secured loan? Read this post that answers both the questions

Unsecured loans are a less risky option for you compared to a secured loan. Because you can’t lose any assets if you can’t repay the loan. The loan is not secured against a property or any other collateral, unlike secured loans. Plus, many lenders will offer you a top-up facility on your unsecured loans if you do successful repayments, as an additional benefit.

Unsecured Loan is better than a Secured Loan

Easy Approval

When you apply for an unsecured loan, the lender will approve the request based on your income, credit history and current obligations. And the loan is approved within 3-7 working days. Some lenders can approve even faster. On the other hand, a secured loan like a home loan can get approved within 15 days or more as the collateral value is estimated to know your eligibility and the repayment capacity of the individual is assessed to determine whether he/she is eligible to pay the borrowed loan amount on time.

Shorter Tenure Results in Lesser Interest Outgo

If you compare the interest rate of an unsecured loan to a secured loan you will find that the unsecured loan interest rates are comparatively high. But, it doesn’t imply that the secured loan is more affordable than unsecured loans. Like if you borrow a secured loan such as a home loan or loan against property despite they are offered at a lower interest rate, you end up paying much interest on your borrowed loan. This is because the average tenure of home loan and loan against property is high. A home loan is given for around 15-20 years on average, loan against property can be given for a maximum of 10 years. The long loan tenure results in more interest payments. Whereas unsecured loans can be paid in 12 to 60 months and there is less payment of the interest.

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Fixed Rate of Interest

One of the benefits of an unsecured loan is that the interest rate remains the same during the repayment period despite the changes in the lending rates of banks or NBFCs. Whereas, the benefit will not be available to you if you borrow a secured loan such as a home loan. The floating rate of interest on secured loans changes with the RLLR, base rate or MCLR of the lender, resulting in fluctuations on interest payments.

Where to Apply for an Unsecured Loan in India?

You can apply for an unsecured loan in India at banks or non-banking financial companies (NBFCs). And borrow from the one which offers the most suitable for you. Unsecured loans are usually personal loans. So, check out the table below to choose your lender for an unsecured loan.

Banks/NBFCsLoan AmountInterest Rate (In Per Annum)TenureProcessing Fee
State Bank of India (SBI)INR 20 lakh9.60% - 13.60%6 months to 6 yearsNIL-1% of the loan amount
HDFC BankDepends on your monthly income and credit history10.75% - 21.30%5 yearsNIL-2.50% of the loan amount
Kotak Mahindra BankINR 20 lakh10.75% - 17.99%5 years0.99%-2.50% of the loan amount
ICICI BankINR 40 lakh10.75% - 18.49%12 to 60 months0.99%-2.25% of the loan amount
Axis BankINR 15 lakh12.00% - 24.00%5 years1.50%-2.00% of the loan amount
IDFC First BankINR 25 lakh10.99% - 22.00%5 yearsAs applicable by the bank
Standard Chartered BankINR 50 lakh7.99% Onwards5 yearsNIL
RBL BankINR 20 lakh17.50% - 26.00%5 years2.00%-2.50% of the loan amount
YES BANKINR 40 lakh10.45% Onwards5 yearsUp to 2.50% of the loan amount
Bajaj FinservINR 25 lakh10.99% - 16.00%5 yearsUp to 3.00% of the loan amount
Tata CapitalINR 25 lakh10.99% - 18.00%12 to 72 months0.99%-2.50% of the loan amount
Fullerton IndiaINR 25 lakh14.00% - 24.00%5 years2.00% of the loan amount
IndusInd BankINR 15 lakh11.00% Onwards5 years1.00%-3.00% of the loan amount
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How to Apply for an Unsecured Loan?

You can visit the bank or NBFC’s branch and request for an unsecured loan by filling the application form for it. Submit the form, an attached passport size photograph as well as the following documents.

ID Proof

  • Aadhaar Card
  • PAN Card
  • Voter ID Card
  • Passport
  • Driving license

Income Proof

For Salaried Employees:

  • Salary Slip
  • Salary Certificate
  • Bank Statement
  • Form 16

For Self-employed Persons:

  • ITR Report
  • Balance sheet
  • Turnover of the business
  • Form 16

Address Proof

  • Electricity Bill
  • Telephone Bill
  • Rent Agreement ( for Tenant)
  • Aadhaar Card
  • Passport

As soon as you submit the documents, the lender starts the verification process. And after that, the bank or NBFC will sanction your loan and the borrowed amount is disbursed to your bank account. The entire process can take 3-7 working days. If you are an existing customer of the bank or NBFC, you can get a pre-approved loan credited to your account in a few hours.

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Personal Loan Interest Rates October 2020
Fullerton India14.00% - 33.00%
HDFC Bank10.75% - 21.45%
ICICI Bank10.75% - 18.49%
IndusInd Bank11.25%
Kotak Bank10.99% - 20.99%
RBL17.50% - 24.00%
Standard Chartered Bank11.00% - 15.00%
Tata Capital10.99% - 18.00%
Home Loan Interest Rates October 2020
Axis Bank7.75% - 8.55%
Bank of Baroda7.00% - 8.40%
Citibank8.20%
HDFC6.90% - 7.65%
ICICI Bank6.90% - 8.05%
Indiabulls Housing Finance Limited8.80% - 11.05%
Kotak Bank7.20% - 9.30%
LIC Housing6.90% - 7.90%
Piramal Capital & Housing Finance9.00% - 9.10%
PNB Housing Finance7.90% - 9.20%
Reliance Home Finance8.75% - 14.00%
State Bank of India/SBI6.95% - 7.60%
Tata Capital9.20% - 9.35%