Personal loans are a popular way to arrange funds to meet your individual needs, like planning a vacation, making wedding arrangements, or dealing with medical emergencies. You can borrow a loan from a digital lender, a financial company, or a bank. You can select the loan type based on your ability to make timely repayments. Your credit score is vital in deciding whether you will get approval on your loan application. To get support for a personal loan in Jaipur or any other city in India, you do not need to show a security asset.
The personal loan application process is relatively easy and hassle-free, but they all have a high-interest rate. The best thing about personal loans is their versatility. You can apply for personal loans based on your requirements, from purchasing a phone to managing funds for a trip abroad. There are no restrictions or frowning eyebrows on the loan. As soon as you pay the monthly debts one time, the lenders don’t have a problem. Your credit score also plays an essential role in approving the loan faster. A better credit score (750 or above) suggests you are a potential borrower because you have a history of repaying your loans on time.
Types of Personal Loans
When it comes to personal loans, there are various types of them available. As mentioned earlier, the beauty of personal loans lies in their versatility. You cannot get a personal loan for absolutely no purpose. Whether you are planning your first trip with family or getting married soon, a personal loan will cover you. First, you can break a personal loan into two sections depending on the needs of security assets. These are:
Secured Personal Loan
A secured personal loan is a type of personal loan that a lender approves you in exchange for a security asset or collateral. The collaterals are generally vehicles, houses, or physical entities. Security personal loans include-
- Vehicle loans
- Secured credit cards
- Life insurance loans
In the case of credit cards, the lender asks for a security deposit of money instead of a physical asset. You can use a home or a vehicle as collateral for the rest. If you fail to repay the loan, the lender will reclaim your collateral. Many lenders offer secured personal loans in Jaipur and other major cities in India.
Unsecured Personal Loan
In contrast to a secure personal loan, an unsecured personal loan does not require you to provide any collateral for approving a loan. This makes it one of the most popular types of loans people go for the most. Because there is no collateral backing, these loans are risky for the lenders as there are more changes of forfeiting and discrepancy. Keeping the risk factors in mind, the lenders have set the interest for unsecured personal loans higher than its counterparts. There are no chances of repossessing the physical or digital entities if the borrower fails to reimburse, so they go for legal ways to settle the dispute.
Unsecured personal loans apply no conditions on the borrowers apart from the high-interest rate. Following are the different types of unsecured personal loans that are popular among borrowers.
a) Short-Term Loan
Short-term loans generally have a tenure of 1-2 years; in some cases, it is longer. An excellent example of a short-term nbfc personal loan is a credit card. Because of the shorter loan period, it imposes higher interest rates on the borrower. Although these types of loans don’t require collaterals, some financial institutions might ask you to pledge an asset to get a hold of the loan amount.
b) Fast Cash Advance Loan
These loans also fall under the category of unsecured personal loans. The Fast Cash Advance Loan is specially designed for those who need money on an urgent basis. These are generally non-traditional loans that some finance institutions offer. Borrowers don’t need to get a credit check or pledge collateral to apply for these personal loans. Like short-term loans, the lenders impose a higher interest rate because of the risks involved.
If the borrower fails to repay, they might have to pay much of the principal amount they took as a loan. The reimbursement must be done within two weeks at most. Although the loan application process is easy, the repayment involves strict rules.
c) Home Equity Loan
These types of loans are borrowed from lenders against the equity in their homes. These loans are consumer debt based on the house’s current market value. In simpler words, the lenders decide the loan amount depending on the difference between the current market value of the home and the due mortgage balance of the owner. The home equity loan is quite like a mortgage, wherein the equity works as collateral. Thus, this doesn’t entirely qualify as an unsecured personal loan.
Like every loan, a home equity loan also has a loan tenure. A borrower is supposed to waive off both the principal and interest by making regular payments of a fixed amount. If the borrower fails to reimburse the loan amount, the house will be sold to settle the remaining mortgage balance.
d) No Credit Loans
These are generally personal finance for those who do not have a credit history. These are designed for those who have a low or no credit score. Having no credit history, this loan has chances of high risk. Thus, no credit loans generally have high-interest rates. You may get a no-credit loan from financial institutions with a higher interest rate and some unsettling terms.
Personal loans are obvious and transparent in their terms and conditions. The application process is easy, the approval time is short, and the versatility of the utilities is there. Personal loans are meant if you have a good credit history or a significantly high credit score. If you consider yourself a credible borrower who understands punctuality regarding reimbursements, go for any personal loans.