Unsecured loans in India

When you get credit without presenting any document or giving any assets to the lender, it is called unsecured loans. These credits are for a small amount and short term. You can get an unsecured personal loan from a mobile app or website very easily.

Unsecured loan meaning

When you get credit without presenting any document or giving any assets to the lender, it is called unsecured loans. These credits are for a small amount and short term. You can get an unsecured personal loan from a mobile app or website very easily.

Long-term credit with higher amounts are secured loans. For example, your home, auto, and business loan are generally secured loans. On the other hand, your personal loan is mostly unsecured. An unsecured loan meaning is you get money with no paperwork. You can get credit by completing the online application. Unsecured loan example includes credit card, personal loan, etc.
In unsecured lending, the company takes a risk by offering you credit. If you do not repay on time, they don't have any assets. Therefore unsecured loans come with a higher interest rate. If you do not pay on time, this reflects on your credit score and impacts your chances for future loans. 

Types of Unsecured Loans

Various types of funding can help you to get money without collateral. You do not need any guarantor or collateral for such unsecured loans.

✔Personal loan

Personal loans are available without pledging anything. The approval amount will be small. The loan term is dependent on your credit amount. The lender approves the amount based on your income and capability to repay the EMIS. It is easy to avail. You can take a personal loan from the app or website of Robocash.

✔Student loan

It is an unsecured personal credit you can get after getting admission. You do not have to pledge any assets. The only proof of your admission is enough to secure your money. You need to repay this money after completing your education. Interest on an unsecured credit is higher, but a student loan is an exception.

✔Credit Card

It is the most popular form of the personal loan without security. You do not have to show any assets to get a credit card. You will get it based on your income and credit profile. It offers interest-free credit for small-term like 30 days. However, you will have to pay a higher interest rate if you miss the repayment date.

✔Credit Line

It is similar to a personal loan. It is a type of unsecured lending. You get a limit of credit from the company. You can avail of any amount from the approved amount at any time. You do not have to pledge any document or assets for a credit line. It is easily available for salaried people. 

✔Payday loan

It is available for the working-class who gets the salary. It comes with a very short tenure. It means you have to repay the money whenever you get the salary. It is a personal loan without security.  

✔Peer to Peer Lending (P2P)

The lender is an individual investor in this type of lending. P2P platforms collect the data, and then, based on the lender's preference, they offer them options. If the lender likes and trusts your profile, they will offer you the money. It does not require any paperwork or physical verification.

Pros and cons of a personal loan without security

Everything comes with both positive and negative sides. A personal loan without security comes with both.

Pros

Easy process to apply for a loan. You can complete the application within a minute. You don't have to go anywhere for money.
You do not need any assets or physical verification. The approval rate is faster due to the simple process. You can do everything digitally for such loans.
Improve your credit score by repaying your loan on time. Get higher limits for the next loan when you close your previous loans without delay.
Available for everyone, unlike secured loans. If you have no credit score or bad credit history, you also have a good chance to get money.

Cons

Personal loan without security means you have to pay a higher interest rate. Since terms are short, you have less interest amount in terms of amount. 
Credit tenure is short, so you get less time to repay. If you do not repay the loan on time, you have to penalty. The penalty is very high in unsecured loans.
If you fail to repay on time, it will impact your credit score. You might end up with a bad credit score for a small loan amount such as Rs. 5,000. It will stay on your credit profile forever. It will reduce your chances of getting other financing such as a home loan or auto loan in the future.

How to get unsecured loan approval

Getting unsecured loans in India is complex compared to secured credit for a car or home. Unsecured loans require a high credit score, and interest on this is also high. If you want your application for an unsecured loan not to get rejected, then keep the following points in mind.

Always maintain a good credit score

If you already have a good credit score, then your chances of loan approval is high. A higher credit score helps in getting a loan at a lower rate of interest. Personal Loan apps like Robocash do not reject your application based on only a low credit score. If you have a low credit score, you will still have a chance of approval with Robocash at the same rate. 

Show income proof

Lender provides a loan if you provide your income proof that your ability to repay is high. Income proof helps you get a higher amount of the loan. Robocash does not ask you to present any income proof. You have to self declare your income without any proof.

A balance between debt and income ratio

A good balance between your income and debt always helps you get a loan. If you already used your credit limit, then you may not get your next loan. A balance between debt and income also helps manage your personal finance and your future need for money.

Close your previous loan

In case you have already taken a loan or defaulted on any credit in the past that impacts your credit score. A bad credit score reduces the chance of approval. To get a money, first, close all your previous loans and pending EMI. 

Maintain your employment status

Most lenders do not approve a customer who has less than a six-month job status. Changing your employer reduces the chances of an application approval. It shows your job is unstable, and you might end up not repaying yourEMIs on time. 

Do not apply on multiple platforms same time

Multiple applications for the credit indicates that your creditworthiness is not good. Multiple applications will harm credit scores. Maintain a minimum three-month gap after the rejection of the application. In case of urgent requirements, search for alternative lenders who have lower credit criteria for the lending.

Maintain credit mix

A balance between secured and unsecured credit helps increase your credit score. A higher credit score increases the chance of loan approval and best interest rate.
Table comparing the collateral loan and the unsecured loan

Here is a simple table for you to understand the difference between these two types

Conclusion

Secured loans are available for the higher amount by pledging your assets. You are at risk of losing your asset if you do not repay the amount on time. The interest rate is less, but due to long tenure interest amount will be higher. You also need some guarantor to get such finance. Home Loans and Auto loans are the most popular form of secured loans. 
An unsecured loan meaning you get money without pledging any assets. These credits are simple and easy to avail of. You do not need any collateral or guarantor for this money. You can use the money for anything like medical expenses or shopping. It is available for the short term. You can take it quickly in your bank account.
 Next time if you run out of cash, you can take an unsecured loan. Money will be transferred to your bank account without any paperwork or pledging assets.