Unsecured loans

Discover hassle-free financial support with Aiws Live's unsecured loans. Access funds quickly without the need for collateral, making it perfect for personal or business needs.

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Unsecured loans

An unsecured loan is a type of loan that doesn't require collateral, such as assets or property, to secure the loan amount. Instead, lenders approve these loans based on the borrower's creditworthiness, income stability, and repayment capacity.

Types of Unsecured Loans:

  • Signature Loan : Also known as good-faith loans, signature loans only require the borrower's signature as a promise to repay the loan. They're typically offered by banks and NBFCs based on creditworthiness and cash flow.

  • Personal Loan : The most common form of unsecured loan, personal loans can be used for various financial needs without any end-usage restrictions. Approval depends on factors like credit score, income stability, and repayment capacity.

  • Peer-2-Peer Loans : These loans are facilitated through online lending platforms where individuals lend and borrow money directly. P2P loans have fewer eligibility criteria compared to traditional lenders but may come with higher interest rates.

  • Instant Loans : Designed to provide quick financial assistance for urgent expenses, instant loans offer fast approval and disbursement, often within hours. However, they may have higher interest rates and shorter repayment periods.

Features of Unsecured Loans:

  • No Collateral Requirement

    Unsecured loans don't require borrowers to pledge assets as collateral.

  • Credit-based Approval

    Lenders assess the borrower's credit score, history, and financial behavior to approve the loan.

  • Fixed Interest Rate

    Unsecured loans typically come with fixed interest rates throughout the loan tenure.

  • Short to Medium Loan Tenure

    Repayment periods for unsecured loans are shorter compared to secured loans.

  • Flexible Use of Funds

    Borrowers can use the loan amount for various purposes without restrictions.

Benefits of Unsecured Loans:

  • No Collateral Required

    Borrowers don't risk losing assets in case of default.

  • Flexible Use of Funds

    Loan amounts can be used for any purpose.

  • Quick Access to Funds

    Approval and disbursal are faster compared to secured loans.

  • Minimal Documentation

    The application process requires minimal documentation.

  • Accessible to a Wide Range of Borrowers

    Borrowers with different credit profiles can access unsecured loans.

Disadvantages of Unsecured Loans:

  • Higher Interest Rates

    Interest rates on unsecured loans are generally higher due to the absence of collateral.

  • Limited Loan Amount

    Borrowers may receive smaller loan amounts based on income and financial situation.

  • Shorter Loan Terms

    Repayment periods are shorter, resulting in higher monthly payments.

  • Limited Negotiation Power

    Borrowers have limited negotiating power on interest rates and terms.

  • Risk of High Debt Levels

    Easy accessibility may lead to borrowing more than necessary, increasing financial strain.

Tips to Prevent Default on Unsecured Loans:

  • Plan Your Budget

    Understand your income and expenses to manage loan repayments effectively.

  • Prioritize Loan Payments

    Make loan repayments a top priority to avoid defaults.

  • Set Up Automatic Payments

    Automate loan payments to avoid missing deadlines.

  • Consider Debt Consolidation or Refinancing

    Explore options to consolidate or refinance loans for better repayment terms.

  • Regularly Review Finances

    Periodically review your financial situation and adjust repayment strategies accordingly.

Unsecured Loans for Different Individuals:

  • Self-Employed

    Personal loans cater to the financial needs of entrepreneurs and business owners with different documentation requirements.

  • Salaried

    Personal loans provide financial solutions for salaried individuals with stable income flows.

  • Students

    Education loans offer funding for students with the help of guarantors and co-applicants.

Key Factors Affecting Unsecured Loan Approval:

  • Credit Score

    A higher credit score increases the chances of loan approval.

  • Income and Employment Status

    Stable income and employment enhance eligibility.

  • Repayment Capacity

    Lenders assess the borrower's ability to repay based on income.

  • Lender's Policies and Risk Assessment

    Each lender has unique policies and risk assessment criteria.

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