An unsecured personal loan is an overall demanding loan scheme that helps individuals meet their ever-hoisting personal needs. It is an instant finance backup solution that can veil your host of critical financial requirements. You can borrow the money from any bank in India and utilize it for several purposes like paying off debts, shopping for a car, debt consolidation, dream vacation, so on.
In India, several banks, NBFCs offer attractive unsecured personal loan schemes to their customers at competitive interest rates. More interestingly, you can avail of those facilities from both offline or online methods. And, surprisingly, you do not need to put any security or collateral, making this a risk-free loan scheme.
Concept of unsecured personal loan:
An unsecured personal loan is a simple, straightforward and convenient credit product that does not demand collateral. This loan type is also a Signature loan since all it needs is your signature. The borrower only has to match the lender’s borrowing requirements, of course. Lenders feel it risky to provide money when the loan is not backed up by collateral. Eventually, they may charge you higher for this loan type. And the applicant must hold a healthy credit score as well.
This article will highlight some risk factors you should look out for before signing the agreement.
Risk factors to avoid while applying for the loan:
- The Interest Rate
In some instances, you might be qualified for a personal loan. However, it seems not to suggest you should accept it. Some lenders may offer you an interest rate below 10%, and some may cost you two or three times higher. The overall interest rate depends on your credit or CIBIL score. Despite that, the lender may demand you the interest charge whatever they decide.
- Privacy Concerns
The banking sector may come with strict privacy rules as a part of formal regulations. Yet, you may find other options, respectively less traditional and convenient as well.
- Early repayment Penalties
Are you permitted to repay the unsecured personal loan quick-maturing than tenure? Do you have to face any penalty or further charges for quick repayment? Although the penalty section or additional expense depends on the type of loan you are getting, from a bank or NBFC or by other means. However, several banks in the market are favourably inclined to your early pay off decision than others. So, if early repayment is essential for you, read the agreement copy thoroughly to ensure you do not fall for any penalties.
- The insurance vouches
Some lending companies mandatorily vouch for additional life insurance sales pitches to protect the loan. They hurl the term as “life’s unexpected events”, which can get in your way of repaying the loan. If you agree to the insurance, in that case, contact your agent (whom you trust) and get the possible information.
- Heavy fees in advance
How much can it cost you to obtain the credit capital into your bank account? Well, in the case of a mortgage, the fees in advance can widely vary. Therefore, you must execute your own investigation and make sure the amount you are spending is fair and acceptable. And also, the charge is in line with market standards. Multiple lenders are waiting to offer you the loan. So, do feel the rush to accept the loan fast.
- Avoidable Complications
Whether it is a vehicle loan, home loan, bike loan or a personal loan – the loan is an uncomplicated credit scheme. It expresses a straightforward concept: someone is lending you money instantly, and you pay the entire amount back with sufficient interest. Hence, if a financial institution offers you cash-back, enticing deals, payment holidays, understand that the company will not dissipate funds on that deal. The harsh truth is the applicant is the person to lose possibly. Besides, a personal loan offers a simple concept to understand. If you fail to comprehend, that indicates a red signal.
The bottom line:
An individual generally considers an unsecured personal loan for debt consolidation. However, if you are looking for a risk-free and hassle-free loan, make sure to circumvent the risk factors mentioned earlier. However, to enjoy a risk-free loan experience, you cannot waive the loan amount. Otherwise, the lender might call for legal actions against you.