Sometimes it might be hard to achieve your dreams without having liquid funds or a collateral that can be pledged to borrow money. Whether it is growing a small business or planning higher studies, money should never be an issue to put a pause on your dreams and for that, there is one solution. The solution is to borrow unsecured funds.    

We will go through the process of how to bag a small personal loan without any security. First, let us understand: 

What are Collateral-Free Loans? 

As the name suggests, unsecured or collateral-free personal loans are short-term loans offered by the lending institution without any security. 

Collateral refers to a transferable asset that can be pledged by the borrower to secure the repayment of the borrowed money.    

Generally, when large loans are sanctioned financial institutions keep a liquid asset as a security for the repayment of the loan amount. 

Advantages of collateral-free personal loan

• One of the significant advantages is that you do not have to worry about your asset. Since the nature of a personal loan is unsecured you can apply for it even without pledging any asset. 

• Due to technological advancement, the loan approval time has been cut short. Furthermore, if you have a pre-approved offer on your account, the loan can be disbursed within seconds. So, to get some quick money you can rely on personal loans. 

• Personal loans do not have any strict boundation on usage. Personal loans are disbursed directly into your bank account thus they can cover a lot of other expenses such as weddings, traveling and hospitalization expenses. 

Ways to Get A Personal Loan Without Security 

Repay Previous Dues

It will be an added advantage if you pay off your existing loans or credit card dues before applying for a fresh unsecured loan. It will reduce your monthly expenses, thus, will save more money in your pocket. This will give lending institutions a sense of confidence, as they focus on the disposable income of the borrower. You should know that in the case of unsecured loans, it is always better to have a lower debt-to-income ratio. 

Improve/Build Your Credit Score

It is very important to have a good credit score while applying for an unsecured loan. To improve your credit score you need to start monitoring it. You can easily check your credit/CIBIL score online to know about discrepancies if any. 

Check the eligibility on the lender’s website

Once you are confident that your CIBIL score is good to bag a low-interest personal loan. You can visit different lenders’ websites to check for the eligibility and offers if any. Also, check for the eligibility to apply for a small personal loan, as it varies from a different lender to lender. 

Major lending institutions such as Bajaj Finserv provide pre-approved offers to their existing customers. So, to check the availability, you can visit their website and fill in the information. 

Fill the application form 

Once you are sure of the eligibility criteria of the lender, and if you think you fit in. You can go ahead with filling the application form. You will be required to upload/submit these documents:

KYC documents (Do not worry if you are an existing customer, they already have it in their database.)

Proof of address 

Income Proof   

Bank Statement/Passbook 

Unsecured loans can be a blessing during emergencies, as their approval time is lesser than secured loans. You can follow these steps to bag without pledging any security.  

Read Also: How Does a Small Personal Loan Work?

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An instant personal loan can help you address a range of expenses, be it funding your child’s higher education, consolidating debts or even financing a medical emergency. The collateral-free nature of the loan and hassle-free application process make it a convenient financing option. However, its recommended that you exercise prudence when you take any loan, including a personal loan. Despite its beneficial features, there are a few downsides to availing a personal loan. For instance, since it’s unsecured, it carries a higher cost of borrowing. 

To know if the solution is a right fit for you, read on to know the advantages and disadvantages of an instant personal loan.

Advantages of Availing an Instant Personal Loan

• Instant Approval

Applying for a loan can be a tiresome and a long-drawn process that requires filling out dozens of forms and producing numerous documents. However, the same cannot be said about an instant personal loan. With lenders like Bajaj Finserv, you can easily apply for a personal loan online and get approval within 5 minutes. Moreover, you benefit from 24-hour disbursal post approval too.

• High Loan Amount

On meeting the eligibility criteria and providing supporting documents, you get access to ample financing. While this amount depends on the lender, with a flawless credit report and a high CIBIL score, you stand to obtain a substantial instant loan. For example, with Bajaj Finserv, you can get up to Rs.25 lakh in no time at all.

• Collateral Free Nature

Most loans require you to pledge collateral and this can prove to be a significant barrier to availing finance. However, a personal loan requires no security and so, you are saved from the hassle of identifying a valuable asset.

• Unrestricted Use

Unlike other loans, an instant personal loan places no restrictions on its end usage. So, you can use this loan to finance a wedding, go on vacation, refurbish your home, buy a used car or simply bring home new electronic appliances. 

Disadvantages of Availing An Instant Personal Loan

• High Personal Loan Interest Rates

Since personal loans are not backed by collateral, the interest rate can be high. A very high rate can cause repayment to become a burden. However, interest rates on personal loan are subjective to lenders and you can secure a competitive rate if you pick the right lender and have an excellent credit report and a steady income.

• Restrictive Part Pre-Payment Terms

While you have the option of a flexible tenor, lenders generally disapprove of any changes made to the EMI schedule. So, in most cases, you won’t be able to part-prepay or foreclose the loan before the tenor is over. If you are able to, then you will probably have to pay a 2-4% fee for the facility. 

A smart way to overcome this is to pick Bajaj Finserv Flexi Loan facility. It allows you to withdraw multiple times from your approved sanction. You can do this without submitting fresh applications or paying extra charges. Additionally, interest is levied only on the withdrawn amount. Best of all, you can make part-prepayments or foreclose the loan without paying any extra charges.

• Fixed Eligibility Criteria

Since an instant personal loan is a collateral-free solution, most lenders insist that you earn a minimum income depending on your city of residence, as this assures them of repayment. Additionally, your credit report comes under scrutiny and a poor or average score can lead to you not getting a high loan amount or having to pay a higher interest rate.

As is evident from the aforementioned pointers, a personal loan has ample pros and a few cons, which you can easily overcome by picking the right loan provider and improving your financial profile. For instance, if you choose Bajaj Finserv Personal Loan you don’t have to worry about stringent eligibility criteria, you can make prepayments should you wish to, and enjoy a competitive interest rate too. 

Moreover, to obtain an instant personal loan from Bajaj Finserv, all you need to do is check your pre-approved offer and enter basic details into a form. On doing so, you get approval through a customised deal and instant access to all the benefits of this feature-rich loan.

Must Read: Difference Between CIBIL Score And CIBIL Report

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Are you planning to take a personal loan? If yes, then you must be aware of the struggle which every borrower face while shortlisting the lenders. Finding the right lender can be very difficult at times.

The more options cause more confusion, and the borrowers end up taking the wrong decision. However, you can shortlist the best loan provider if you tackle this issue calmly and follow the given steps.

1. Make a List of Reliable Loan Providers:

The first thing that you should keep in mind is the reliability of a loan provider. You should focus on protecting yourself from all the fake lenders and frauds. To do this, you have to create a list of all banks that are reliable and providing loan services for decades.

Making this list would eliminate all the non-essential lenders whose attractive yet fraud loan offers compel the borrowers to commit a mistake. To cut the confusion, you should only move on to the next step with the banks that you selected on the basis of their reliability.

• Check their Eligibility Terms:

Now, open your browser and take out your list to check the eligibility terms of all the selected loan providers. Cut off the providers whose terms aren’t matching with your profile as applying in them would be a waste of time.

Checking all the other things of these banks won’t make sense as they will reject your application if you aren’t an ideal borrower according to them.

• Compare the Interest Rates:

The next step should be a sound comparison of interest rates of all the shortlisted loan providers. This step would be a little bit time consuming as you may have to visit the banks to acquire accurate data.

The information is available online as well, but you will only get a rough range on the internet. The real interest rates are decided on the basis of your whole profile; which includes your profession, income, credit score, and many other things.

• Compare the Loan Amount:

Some banks may give you a higher loan amount than the others. If you are willing to take a big amount as loan, then comparing the available loan amounts of shortlisted banks will be essential.

Maybe the bank you are thinking of finalizing won’t be able to lend your desired loan amount. Eliminate the banks whose maximum loan amount is not even near to your desired amount. If there is a slight difference and all the other things are as per your expectations, then you can compromise a little.

• Check Terms and Other Charges:

By now, there would be around 2 to 3 banks in your list from which you have to finalize your best loan provider. So, you can easily visit all of these banks to get knowledge about their processing fee, repayment terms, loan tenures, and other clauses.

Comparing all these things is necessary if you don’t want to face any problem at the time of repayment due to misinterpretation.

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