What are Collateral Free Loans and their Advantages?
Collateral free loans are disbursed without pledging any asset as security or collateral against the loan. You can apply for an unsecured loan easily and avail higher loan amount without putting your assets on the line.
Loans have made lives easier by providing financial leverage that extends beyond the income.
Whether you require funds to buy an asset, finance your education, or tackle an emergency, loans are often a prudent financial instrument to tide over the emergency.
With Collateral Free Loans you avoid the hassle of arranging a property to put on the line.
What are collateral free loans?
In terms of banking terminology, collateral is an asset that you need to pledge as a security in order to borrow from a lender.
In the event of default, when you don’t repay a loan, the lender takes possession of your asset pledged as a collateral.
For example, in case of a loan against property, where you have mortgaged your house as a collateral, the lender will possess your house in case you default.
So, a Collateral Free Loan is a loan without a security deposit, where you do not have to offer any collateral or pledge your assets against borrowing the funds.
Since the lender doesn’t have a security to fall back upon in case of a default, the interest rates on unsecured loans are a bit higher; however, it depends on your credit history.
Generally, these security-free loans are beneficial when you require urgent funds to tackle a medical emergency, an unexpected house renovation, or simply finance your family vacation.
Loans for such expenses are generally referred to as unsecured personal loans which are disbursed without any collateral, on the basis of your eligibility for the loan.
Benefits of collateral free loans
The most obvious advantages of unsecured loan are that you don’t have to put your assets on the line to get access to funds.
Not only does it offer financial flexibility, but it also protects you from losing additional assets in case you cannot repay the loan in time. Here are a few more benefits of availing collateral-free personal loans:
Easy application process: Since you do not have to itemize assets for collateral to apply for a personal loan, nor does the lender have to evaluate the value of the collateral, the application process is simpler and quicker.
You can even apply for a personal loan online and upload the required documents to get your loan approved.
Instant approval: Traditional loans that involve meticulous paperwork and verification process may take months to get approved.
However, an online personal loan takes no time for approval and you can get the loan amount disbursed in your bank account within 24 hours of your application.
It means you can get quick access to funds when you need them the most.
High loan amount: When you take a secured loan, the amount of your loan is typically subjected to the valuation of the collateral you offer.
But, in case of an unsecured loan, you can qualify for a much higher loan amount based on the lender’s eligibility criteria and your credit score.
This offers much more flexibility for you to meet all your financial requirements with a single loan.
With a good credit history, you can avail collateral-free personal loans at attractive interest rates and flexible payout options.
Lenders offer Personal Loans, Business Loans, and a host of financial services along with special pre-approved offers. Simply share a few basic details to avail yours.
Category: Personal Finance
