5 Advantages of Taking Unsecured Loans

Access to credit has improved considerably over the last ten years. When you are looking for funds, your options are plenty. You can approach a bank, financial institutions, private lenders, or the plethora of fintech companies. 

Depending on various lending parameters, you will have to choose between two loan types: secured and unsecured loans. In this blog we will take a look at the difference between the two types of loans and situations where an unsecured might be a better option.   

Secured vs unsecured loans

To know more about the advantages of unsecured loans, you should first know the difference between secured and unsecured loans.

Secured Loans – The borrower has to provide collateral to the lender for this loan. Most traditional banks provide these, as these are less risky.

Unsecured Loans – The borrower doesn’t need collateral for these loans. As long as your credit history and your repaying capacity is good, you can qualify for these loans. Banks, financial institutions and other private lenders sanction these loans regularly. These loans have an element of risk attached to them. 

Unlike popular belief, unsecured loans offer a number of benefits to the borrower. We will cover the details in the sections below.

Top 5 advantages of unsecured loans

Why should you opt for an unsecured loan? Here are some of the benefits you can enjoy when you opt for unsecured loans. However, please note that most of these benefits will apply to you only if you are disciplined in your repayment cycles.

Simple formalities

One of the most attractive features of unsecured loans is that they are very easy to process due to the following reasons:

• No time wasted in checking the value and authenticity of collateral, as there is no collateral involved 
• Easy online application for business loans with very simple paperwork involved
• Very helpful in case you are looking for quick funds for an emergency (unforeseen medical expenses, business losses, etc.)

Higher loan amount

In the case of secured loans, your bank will only sanction up to 90% of the value of collateral you have submitted. For example, if you have submitted the documents of your property worth INR 1 crore to the bank, you will be given a maximum of INR 85–95 lacs, based on your financial health.

However, in the case of unsecured loans, there is no ceiling to the amount of loans that lenders can provide you. Just your credit history and repayment capacity can get you the entire loan amount you require. However, for huge loan amounts, the interest rates may be on the higher side. So, you might want to check applicable interest rates before deciding the exact loan amount.

Flexible repayment tenure

Unsecured loans are way more flexible than secured loans. Most lenders offer flexible repayment terms for their borrowers. For example, you can either extend or reduce your loan tenure based on your financial condition.

If your credit history is good, and if haven’t defaulted on any of your loan repayments, lenders can also offer you attractive rates of interest. You can negotiate for a better interest rate than others for your future loans, if you maintain a good financial record throughout your loan tenure.

Quick loan disbursal

Since the processing time is quick and the documentation required is minimal, lenders take very little time to disburse unsecured loans. Most of the leading banks and financial institutions disburse up to INR75lacs in just about 48 hours. This makes unsecured loans a good choice, especially if you are looking for quick cash to meet emergencies or critical expenses.

Fosters cordial relationships with lenders

When you repay your unsecured loans on time every single time, it can increase your credibility in the eyes of your lenders. Sometimes, you may require more money in addition to the current loan. In that case, this credibility can stand you in good stead. 

When you maintain a cordial relationship with your lenders, you can negotiate for good rates of interest for your additional loans. Being in the good books of your lenders is very important, as it can help you anytime you need money for contingencies in the future.

Conclusion

Unsecured loans are simple and easy to process. They don’t require any collateral and they are disbursed quickly. 

Here are several reasons why TallyCapital could be the best option for your business loan needs: 

Quick procedure

By taking advantage of the already established connection with Tally, the loan application procedure is considerably speeded up due to the decrease in wait time.

Collateral-free loans

We acknowledge the obstacles faced by young and new companies in raising capital, therefore the loans through our lending partners are collateral-free. 

Competitive interest rates

Through negotiations with our lending partners, we make sure that our interests remain one of the lowest in the market, thereby providing a more convenient and affordable financing structure for our customers.

Flexible funding options

Through our lending partners, we provide lending from ₹50,000 to ₹75 lakhs to businesses of all sizes which allows them to get funds necessary for growth and success.