A Step-by-step Guide to Getting Unsecured Personal Loans

Dr. Tarun Agarwal is a recognised ENT specialist based in Bengaluru. He has been planning to renovate his clinic for a while now. Since most of his savings are invested in mutual fund schemes, he is looking for an unsecured personal loan in Bangalore to fund the renovation. However, with limited knowledge of financial products, he is not sure of how to go about it. Tarun is not alone. Many people like Tarun find it difficult to comprehend financial products in terms of features, benefits, eligibility requirements, and needed documents. If you too are in the same spot, then this article is for you. Here is a step-by-step guide to obtaining an unsecured personal loan. But before we get going, let us first understand what an unsecured personal loan is.
 

What is an Unsecured Personal Loan?

As the name suggests, unsecured personal loans do not require valuables or an asset as collateral. Usually, financial institutions approve your unsecured loan based on your creditworthiness and income.
 
Compared to other loan forms such as a loan against property or business loans, it is very easy to qualify and apply for unsecured personal loans. Although the loan eligibility is determined after evaluating the borrower’s profile, the documents required for a personal loan still are minimal.
 

Advantages of Unsecured Personal Loans in India

• End-use Flexibility

  While applying for an unsecured personal loan, you do not have to disclose the purpose for which the funds will be used. It gives you the flexibility to spend the loan amount the way you want. Therefore, you can avail of this loan for anything such as funding your next vacation or buying a new car. However, you should borrow only what you need to meet your requirements.  

• Collateral Free Loan

  Many people wonder if a personal loan is secured or unsecured. Remember, personal loans are unsecured forms of lending that does not need you to put up any collateral. However, if your loan application is declined due to insufficient income or poor credit history, you may have to use your assets as collateral to obtain this loan.

• Minimal Documentation

  How to get a personal loan from a private lender? The answer to this question is quite simple. The financial institution asks you to furnish some basic documents for the loan approval. These documents include KYC proof, income proof and a passport size photograph. Once the lender verifies your documents, the loan is approved instantly. It is best to visit the lender’s website and gather details of the documentation process and eligibility criteria.

• Flexible Repayment Tenure

  Most personal loans come with short term repayment terms. The maximum repayment term for this financing product is 60 months. Some financial institutions offer borrowers flexibility in repayment terms. Depending upon your need and budget, you can opt for a payback term anywhere between 12 months and 60 months. However, before you sign your loan agreement, don't forget to run an eye over the lender’s loan foreclosure terms and conditions. 
  
  Now that you all have learned about the benefits of unsecured personal loans, it is time to go through the personal loan eligibility requirements and documentation. To avail personal loan in Ahmednagar, the eligibility requirements may vary slightly compared to other cities, but the general process remains the same.

Unsecured Personal Loan Eligibility Criteria:

Whether you are looking for an unsecured personal loan in Hyderabad, Bengaluru, or any other place in India, the loan qualification criteria are nearly the same with small differences in the age factor and income criteria. Read on to know everything about the qualifying conditions in a detailed manner.

Age:

• Only an Indian national can apply for an unsecured personal loan.
• To apply for an unsecured personal loan, you must be between 21 years and 58 years of age. 
• Minimum and maximum age limits differ from one lending institution to another. 

Occupation:

• Personal loans are available to both salaried and non-salaried self-employed individuals.

Unsecured Personal Loan for Self-Employed

• Business owners must have been in their existing business for at least two consecutive years. 

Unsecured Personal Loan for Salaried

• Salaried employees must have been employed with their current employer for at least six months.

Income:

• Whether you are salaried or self-employed, if you are earning a minimum monthly income of Rs 15,000, you can easily apply for an unsecured personal loan.

Documents Required for a Personal Loan

Unsecured personal loans are known for minimal paperwork requirements and speedy approval, making them one of the most convenient loan products. Some documents required for instant personal loan approval are: 

Mandatory Documents:

• Duly filled personal loan application form
• Passport size photograph
• PAN card

KYC Documents:

• Identity Proof (any one):  Aadhaar Card/ Job Card issued by GOI, State Government, and PSUs/ Driving Licence/ Passport/ PAN Card
• Address Proof (any one): Aadhaar Card/ Utility Bill/ Maintenance Bill/ Ration Card/ Passport/ Driving Licence

Income Proof: 

Income Proof for Self-Employed Individuals:

• Last six months current account statement
• Last two years Income Tax Returns (ITR) statement

Income Proof for Salaried Individuals:

• Last six months salary account statement
• Last six months salary slips

Occupation Proof:

For Self-Employed:

• Tax registration certificate
• Shop establishment certificate or company or firm registration licence

For Salaried:

• Appointment letter and increment letter (if any) from the current employer
• Experience letter or relieving letter from the previous employer

How to Apply for an Unsecured Personal Loan?

If you are wondering how to get a personal loan, then think no more. Just visit the nearest branch or outlet of your preferred financial institution and apply for the loan in person. You can also apply for a personal loan online on the financial institution's website. 
 

Unsecured Personal Loan Offline Application Process:

• Go to your preferred lender's nearest branch or outlet.

• Obtain an unsecured personal loan application form and fill out all the relevant information.

• Submit the mandatory documents confirming your identity, age, income, and address. 

• A representative from the financial institution will verify your documents to determine your eligibility and will make you a personalised loan offer accordingly.

• Once the financial institution is satisfied with your application, they will disburse the amount to your account at the earliest.

Unsecured Personal Loan Online Application Process

• Research lenders, loan features, interest rates and offers on loan aggregator websites.

• Go to the website of your selected lender and visit the personal loan product page.

• Click on the 'apply now’ button.

• Enter relevant information on the online application form.

• Based on the information provided, the financial institution will evaluate your eligibility for an unsecured personal loan. 

• Post assessment, the lender will ask you to submit a soft copy of your documents.

• The loan amount will be released to your account as soon as the financial institution is satisfied with your documents.

When to take an Unsecured Personal Loan?

One of the biggest advantages of a personal loan is the flexibility it offers on end-use. You can avail of a personal loan for various legitimate purposes such as children’s education, wedding expenses, and travel fund. Due to this, most lenders classify personal loans under different categories. Some common types of unsecured loans and reasons for availing of an unsecured personal loan include: 

• Debt Consolidation:

  Even though a personal loan is an unsecured form of financing, the interest rate is lower than many other loan products such as credit cards and education loans. If you are struggling with high-interest debts, consider taking an unsecured personal loan to pay off all of your debt at once.

• Wedding:

  A wedding entails spending a significant amount of money on jewellery, banquet halls, hotels, and more. These costs can affect your budget and savings in the long run, and personal loans are an excellent way to deal with these costs.

• Medical Emergency:

  Your health insurance may not be enough to cover your medical treatment and pharmacy charges, given the sky-high cost of healthcare facilities. In addition, all health insurance plans have a specific waiting period for different health conditions, and you can use your insurance only after completing the waiting period. This is where an unsecured personal loan can help.

• Higher Education:

  Sending your child abroad, or to another city, for higher education is a significant financial investment. College fees, accommodation costs, meals, commuting, and other essentials—all these add to the financial burden. If you are a middle-class person, these costs might burn a hole in your wallet and drain your bank account. However, you can easily manage such expenses with an unsecured personal loan.

Things to Consider Before Taking an Unsecured Personal Loan

• Eligibility Check:

  Before you apply for the loan with the lender, make sure you have gone through the lender's essential qualification criteria. Applying with a lender whose eligibility requirements match your profile saves you time and effort, and may even get you a better bargain on your unsecured personal loan interest rate.

• EMIs:

  Knowing your monthly responsibilities ahead of time not only helps in budgeting but also allows you to make better comparisons between different lenders. Use a personal loan EMI calculator to determine your unsecured loan EMIs beforehand. 

• Fees and Charges:

  The personal loan interest rate is not the only factor you must consider while applying for a loan. Check the annual percentage rate or APR, processing cost, foreclosure fees, rescheduling fees and other additional charges. Although these are minor costs, it is always a good idea to be aware of them to better manage your budget.

• Turnaround Time:

  Most people prefer personal loans at the time of emergencies when the need for funds is immediate. Therefore, you must get the loan amount at the right time. Before signing your loan application form, ask your lender about their loan processing time.

To Conclude:

Unsecured personal loans can help you in the face of unforeseen events and give you funds just when you need them the most. With minimum paperwork and quick processing time, it is a perfect option for almost all financial demands. If you are in urgent need of cash, consider availing of an unsecured personal loan and meet your requirements without much stress and hassle.