FAQs on Unsecured Loan
“Risk comes from not knowing what you’re doing.”
You might be having many questions in your head regarding an unsecured loan. We’ve answered some of the most frequently asked questions (FAQs) for you.
An unsecured loan is your saviour during the financial emergency or when you face the situation of financial crunch. We all that to get an unsecured loan is the easy, quick, and paperless work.
1. What is an unsecured loan?
An unsecured loan is usually given by banks and the non-banking financial company (NBFC) to the customers. Based on a few things like age, credit history, income, and employment history. An unsecured loan means you don’t have to provide the lender with the collateral like property/gold/ machine to avail it.
2. Does an unsecured loan have a minimum amount to borrow?
Depending on the banks, you can avail of a minimum of Rs. 5000 for an unsecured loan.
3. What is the maximum amount of unsecured loan I can get?
This also depends on the banks. Most of the banks will provide you with a loan for up to Rs. 25 lakhs depending on the applicant credit history, income, and repayment capacity. The banks do offer more loan amount, but this depends on the bank and the customer’s eligibility.
4. What is the tenure for an unsecured loan?
The tenure for the repayments is generally set to1-6 years.
5. What are the documents required for an unsecured loan?
- Resident proof
- Bank statement from the past six months
- Signature application
- Photo ID and age proof
Note: These are the general documents.
- However, if you are a salaried person, then you need to provide this as well:
- From 16 or your income tax returns
- Salary slips from last six months
- If you are a self-employed person, you need to provide:
- Income tax returns from the last three years with income
- Balance sheet and profit and loss account which is CA certified
6. What about the interest rates?
The loan comes with an interest that a person must pay. A certain percentage is set on the principal amount by banks or NBFC. Usually, the rate is from 13% to 37%.
7. Will the loan have a processing fee?
The processing fee is a charge that will have to pay when your loan gets distributed. It is a fixed sum or a small percentage of the entire loan amount. Banks are transparent about the fees, and you can find out about it by checking the loan details before applying for it.
8. How is the EMI calculated?
Your unsecured loan Equated Monthly Instalment (EMI) is calculated by taking into account:
- Interest rate and processing fee
- Loan amount
- Loan tenure
- Amortization details
9. Does unsecured loan need a Guarantor?
The answer is NO. In unsecured loans, there is no need for a guarantor.
10. What is prepayment?
Repaying your loan before the tenure is called prepayment. Whenever the customer is ready and willing to repay their unsecured loan, they can do so by intimating the bank about the wish.
11. Will prepaying my unsecured loan has any charges?
Some banks do levy prepayment charges on unsecured loans. It can either be a standard amount or a percentage of the total loan amount. This will depend on the banks and the policy they follow, although it may not be such a bad idea for you to check with your bank in advance about the charges.
12. How long does it take for an unsecured loan to get dispersed?
This depends totally on banks.usually the unsecured loan is disbursed within 24 hours of your application. A check or demand draft is provided by the bank, which is either couriered to you or can be physically collected from the branch. In rare cases, the loan amount is disbursed to your account through NEFT.
However, the process is entirely paperless if you apply for a loan online platform.
13. Is there a balance transfer facility available on an unsecured loan?
An unsecured loan balance transfer is nothing but transferring your loan to another bank from another rate of interest. This can also be done if you want to switch from your current loan to another loan within the same bank. The fact is the balance transfer facility is available only with a few selected banks, and the rules, procedures, and policies may not be the same with the bank.
14. What happens if I default my unsecured loan?
If you default on your loan for whatsoever reason, there would be significant consciences. The most damaging one will be your credit score. You will be not considered for loans or credit cards in the future. Also, banks can blacklist customers who have defaulted on loans or who have a low credit score.
One should remember that an unsecured loan is a responsibility, and payments have to be made on time. Though it is useful when you’re facing a financial crunch, an unsecured loan must be only taken after you have analyzed your financial situation and repaying capacity.