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Collateral free personal loan What does it mean

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Posted by : Saahil Reddy on | Aug 06,2021

Earlier, for every type of loan, the person needs to keep something collateral against the loan. Mainly, the collateral is the assets with a good measurable financial value that can help a person borrow a loan against it. It can be any form, i.e., real estate, machinery, vehicles, shares, and even stocks, to avail the loan. 

 

But now, many things have changed in our surroundings, so is the loan system. Nowadays, many financial institutions have come up with the service of personal loans without collateral security which is commonly known as a collateral free personal loan. This type of loan surely brings a lot of peace of mind to the person and helps him to open unlimited opportunities. This type of loan is great for any medical emergency, funds required for higher studies, marriage expenses, etc.

Benefits of Collateral free personal loan

  • Flexibility: This is a type of loan that provides the maximum flexibility for the person to borrow money according to the requirement. Even the person can repay the loan according to the cash flow. 

 

  • Enjoy a loan at a lower interest rate: In this type of loan, the lenders provide it at very affordable interest rates. This will make it very easy for many people to enjoy the benefits of the loan. The low interest rates will lower the total cost of the loan, which is a great deal. 

 

  • Repay over a longer tenure: The borrower can extend the repay tenure according to the capacity of the person. This is very useful in the case of a large amount of loans. What else the person can expect other than low interest rate and flexible repayment options.

 

  • Online account access: Interested people get access to this loan account through online modes. The person can visit the trusted financial institution portal and get all the details there. It is quite easy and convenient for people to apply for a loan.

Documentation and eligibility criteria

  • To apply for the collateral free personal loan, the age of the person should be between 25-65 years.

  • The person needs to submit the Income-tax return statement for the previous year. 

  • The person needs to submit the salary slip or the business turnover slip of the previous year.

  • Documents required as the ID proof are Aadhar card, Pan Card, and even driving licence.

Factors influencing the approval of Collateral free personal loan

Every financial institution and the bank have certain aspects of deciding before giving you loans. This will include the following factors:

 

  • Credit history: The lender will surely have a look at the previous credit behaviour of the borrower to have understood the repayment ability of the person. This will help the person to make sure that the borrower is financially disciplined and is capable of repaying the loan. The higher the person’s credit score, the more are the chances of the person to get the loan application approved. 

  • Incomes: Even with the loan approval, the lender does check the income level of the borrower. This thing is very important because it will state the ability to repay the loan. For this, the person needs to provide all the documents that will state the latest payslips, income tax returns, bank statements, etc. to verify the income details. All these documents are great to get to know the exact situation of the person.

  • Employment status: The lender must be very interested to know about the employment status of the person. The person needs to provide the actual documents that will state whether he is a salaried person or self-employed. If the person is a salaried person, the person needs to provide the offer letter from the present organization. If the person is self-employed, there is a requirement to provide proof of business ownership.


This is how the loan application can get influenced because of the different factors. This loan facility has helped people to follow their dreams easily. Even all the process of getting the loan and its application is made online. This is a great thing that has made the lengthy hectic process of loans to a fast and easy process. If you are planning to raise funds, a collateral free personal loan will be a great option.

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