Types of Unsecured Loans

In this globalized world, the living standards are so high that many a time there arises instances that require urgent cash. The need can be as varied as marriage, hospital bills or urgent home repairs. Where can we get the shortfall amount to fund such requirements? This is where unsecured loans have stepped to help fund the shortage. There are many types of unsecured loans that can be used in different situations as per requirements.

What are unsecured loans?

As the name suggests, these are loans that are given to a borrower without any kind of asset pledged. Your house, vehicle, fixed deposit or your insurance policy are not used as collaterals for this type of loan. Unsecured loans are high-risk loans that are given out based on the borrower’s salary and credit rating. Loans ranging from Rs 50,000 to Rs 25,00,000 can be given with a repayment tenure ranging from 6 months to 60 months.

Types of unsecured loans-

• Over Draft:  You have a savings account with a bank and that bank gives you the privilege to withdraw an amount greater than the account balance. This is called as Over Draft. The excess money that can be withdrawn is considered a loan and attracts an interest on it. 
• Personal Loan: Personal loans are given taking into consideration the salary and credit rating of an individual. These flexible loans can be used to finance anything. Your marriage, hospital bills, education, or home repairs, everything can be managed by this flexible personal loan. Banks place high importance on the credit score. A score of 750 and above is considered in most cases by top banks. However, there are Fintech companies like Qbera which give personal loans with a marginally less credit score of 575 as well.
• Credit cards: Credit cards are plastic money. You can use your credit card to buy anything from expensive gadgets to booking a luxury vacation. These are ideal if you are already in possession of one, and require funds immediately. You do get an interest-free period - usually a month, post which high interest rates will hold applicable.
• Payday loans: These are short-term loans that are given against your paycheck. These loans are good if you have an emergency requirement before your salary is credited. You can avail this loan, which is to be paid as soon as your next paycheck is in your hand. Speaking of which, payday loans have a repayment period of 1 month. 
• Peer to peer loans: These loans are given out by institutions to other institutions or from one individual to another individual. The interest rates are quite competitive and eligibility requirements less rigorous