Disbursal and popularity of low-value unsecured personal loans are on the rise, with an increase of 3.8 times in volume between FY17 and FY21 alone. Due to this sudden and increased dependency on such loans, consumer awareness is of the primary requisites at present. For instance, understanding the various types of unsecured loans is crucial to acquiring the best possible deals.
The utility of unsecured sakarya escort bayan loans is the most commonly used factor to distinguish the various kinds of personal loans available in India.
All types of unsecured loans based on utilization
Here are some of the common unsecured loans that one can avail of depending on his/her needs –
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Wedding loan
Due to the extravagance of Indian wedding ceremonies, expenses are often substantial. Individuals often rely on quick unsecured credit to finance expenses during such occasions. A wedding loan is nothing but a personal loan, which individuals use to fund the expenses of a marriage ceremony, including venue rent, catering, decoration costs, and much more.
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Education loan
Another one of the common types of unsecured loans in India is an education loan. Usually, parents or guardians of promising students acquire such personal loans to finance the considerable costs of higher education in India. Additionally, if one fulfills all eligibility norms, a personal loan can help his/her children study abroad.
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Debt consolidation loan
Debt consolidation refers to the practice of paying multiple existing dues with a single loan. For instance, if an individual is currently servicing EMIs for three different credits, he can choose to opt for a debt consolidation loan and close all three of his existing dues at once. Doing so would mean that he has to pay and keep track of just one EMI henceforth.
The reduced financial and mental hassle is a major reason why one should apply for a personal loan for debt consolidation. One of the crucial types of unsecured loans, debt consolidation loans, allows for interest payment savings as well.
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Home renovation loan
While a housing credit allows individuals to acquire land or housing, one would need to rely on specialised personal loans when undertaking costly renovations. Whether remodelling or completely redesigning an apartment, all of these costs tend to be considerable. Therefore, the option to borrow money online for such purposes can help minimise the property owner’s financial strain.
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Vacation loan
Travelling is a passion for many, but the associated expenses often prevent individuals from visiting their dream destinations. Knowing all about a personal loan for travel can ease such restrictions, allowing one to travel not just in India but also all over the globe. With the principal amount, borrowers can arrange flight tickets, book hotels, and cover all other associated expenses of a vacation.
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Top-up loan
Top-up loans refer to any credit that is taken over and above an existing line of credit. For instance, suppose an individual is already servicing a personal loan worth Rs.20 lakh. However, during his repayment tenor, he suddenly faces an emergency, thereby needing additional financial assistance. In such a case, he can avail an additional advance from the same lender. This added loan is termed as a top-up credit.
A beneficial aspect of this type of unsecured loan is that it is a part of one’s existing loans, therefore, availing a top up loan does not affect CIBIL ratings.
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Business loan
Although business loans are unsecured credits, you cannot term them as personal credit. The loan amount is specifically utilised to fund business expenses. Such loans are one of the few unsecured lines of credit that come with end-use restrictions. Business owners looking for such credit need to meet certain eligibility norms and provide a solid business plan to lenders.
- A survey revealed that 28% of personal loans were availed to fund medical emergencies.
- 25% of such loans were taken to finance weddings, higher education, and other familial requirements.
Factors to consider when availing unsecured loans
Knowing about the different types of unsecured loans is not enough. Individuals planning to avail these credits must also focus on the following –
- Build a high credit score – Due to the lack of collateral in such lines of credit, individuals must possess a CIBIL of 750 or more. Therefore, one must build this rating before applying to minimise the risk of rejection.
- Avail pre-approved offers – NBFCs, such as Bajaj Finserv Personal Loan, provide pre-approved offers on unsecured loans like personal loans and business loans. One can streamline the application and approval process can be when utilising such offers. Borrowers can check pre-approved offers by providing their full name and phone number.
Lastly, regardless of the type of unsecured loan one avails, using an EMI calculator beforehand is important. Doing so can help assess liabilities beforehand, thereby encouraging effective financial planning.
