Until a few years ago, taking a loan was considered risky. A constant fear loomed over every borrower: “What if I fail to repay the loan? I will lose all my valuable assets.” Cut to the present day, and everyone is enjoying the benefits of loans minus the stress of asset loss. How? Of course, because of collateral-free loans!
Also known as unsecured loans, they are truly leading the lending market in India. However, many people have misconceptions about them and, as a result, hesitate to apply for unsecured loans. Manba Finance, an NBFC unsecured loan provider, decided to end all the confusion and help borrowers make an informed decision. So, without further ado, let’s get to the FAQs!
What is a collateral-free loan?
We all have seen dramatic movie scenes where a woman gives up her jewellery to secure a loan or families become homeless overnight due to unpaid debts. These scenarios illustrate an essential lesson on collateral loans. In this type of loan, you must pledge any valuable asset, such as property, gold, vehicles, or stock investments, to obtain the required funds from the financial institution. If you default on the loan, the lender will seize your collaterals or securities and sell them to compensate for their loss.
On the other hand, collateral-free loans are the exact opposite. You need not provide any assets as collateral or security against the loan. The lender will check your eligibility and creditworthiness to sanction an instant loan. With no risk of losing assets, you can enjoy complete peace of mind!
What are the benefits of collateral-free loans?
By now, we all know the most prominent and attractive advantage of a collateral-free or unsecured loan: no loss of valuable personal assets in case of loan repayment failure. The good news is that it’s just one of the many benefits of unsecured debt. Here are three more you should know about:
- Easy eligibility criteria: Compared to collateral loans, the eligibility criteria for a collateral-free loan are relatively simple. Most financial institutions will only check your age, nationality, and whether or not you have an operative bank account. Fulfilling the minimal prerequisites is easy, and the chances of loan approval are higher.
- Documentation requirements: For unsecured loans, you need not submit a zillion documents during loan application—any one proof of identity, residency, and income is more than sufficient, making the entire process entirely hassle-free.
- Quick approval and disbursement: With no collateral verification, approval and disbursement are quick. Your application can be approved in a minute, and the loan amount will be in your account within 48 hours. Hence, applying for an unsecured loan is a wise option when you need instant funds.
What type of loans typically come under the collateral-free category?
The easy eligibility, hassle-free process, and quick approvals make collateral-free loans perfect for individuals with limited assets and immediate needs, students, recent graduates, and small business owners. A few popular types of unsecured loans include:
- Personal loans: Getting an unsecured personal loan online is beneficial when you need immediate funds to cover unexpected costs like a medical emergency, wedding, home renovation, vacation, and higher education in India or abroad.
- Business loans: With entrepreneurship gaining momentum in the country, collateral-free loans for startups are also garnering massive appeal. These loans guarantee funds for business expansion without stringent requirements.
What factors should you consider before applying for a collateral-free loan?
Before you move onto applying for an unsecured loan, keep in mind that:
- You may have higher interest rates: With unsecured loans, there is no collateral for the lenders to recover in case of default. As a result, they often sanction loans at higher interest rates to compensate for this risk.
- You may have extra charges: Along with EMIs, you may need to pay a one-time processing fee. Moreover, the financial institution may include late, part payment and foreclosure charges in your contract. Tip: Remember to read the fine print!
- Your credit score matters: While we mentioned the easy eligibility criteria earlier, having a high credit score is always a plus, as it can guarantee higher loan amounts at lower interest rates.
How to get a collateral-free loan with Manba Finance?
Manba Finance has been leading India’s NBFC unsecured loan market for many years. You can easily avail of unsecured personal loans online or collateral-free loans for startups in three easy steps: check your eligibility, gather your documents, and submit the online application form! After that, Manba Finance will take things forward and ensure you receive the necessary funds in your account.
Do you have any more queries on collateral-free loans? Manba Finance is just a call or message away!
