Often, when it comes to loans, the question that definitely comes to people’s minds is whether they should take a loan or not or should take as little as possible. But sometimes a loan becomes necessary for your needs. Generally, if you are going to buy a home, home loan is a better option for you. Apart from this, you can also take a personal loan from the bank to meet other needs.
When referring to a loan from a bank, you will hear two types of terms, one being secured loan and the other being unsecured loan. Any bank gives you loans mainly in two major categories, secured and unsecured. But many people do not know about these two types of loans. In this article, we are giving you complete information about what are secured and unsecured loans and what is the difference between secured and unsecured loans.
What is a secured loan? (Secured Loan)
A secured loan, as the name suggests, is a secured loan. In which a person has to mortgage any of his property to take a loan from the bank. In this, the borrower always has to deposit some kind of guarantee or asset as security with the bank while taking loan from the bank. Understand it simply, if you have taken a loan from a bank to buy a house, the bank will have rights over your house documents until you fully repay the loan taken from the bank.
In a secured loan, you can use both financial or physical capital as collateral or security. The list of physical assets includes things like houses, shops, gold, cars, while financial assets include mutual funds, equity shares, FDs, life insurance policies.
A loan secured against the customer’s property, assures the bank that their money is safe. During this time, if you do not repay the loan taken from the bank, the bank sells your property and recovers its money. That is why it is called a secured loan.
What is an Unsecured Loan?
An unsecured loan is called an unsecured loan. When a bank gives a loan to its customer without any guarantee, it is called an unsecured loan. In this type of loan, the borrower does not need to provide any kind of guarantee or collateral. Bank unsecured loans are issued based on the customer’s credit history and credit score.
The bank looks at the source of income, payment history, income tax returns and 6 months salary slips of the customer to give the loan. Based on which the loan is sanctioned. Unsecured loans have a higher percentage of interest than secured loans and they get less time to repay the loan.
The list of unsecured loans includes personal loans, credit card loans, instant loans, education loans and business loans. An unsecured loan is given by a bank to its customer as an unsecured loan, as in this the bank does not take any kind of guarantee from its customer in return for the loan. During this time, if the borrower is not able to repay the loan taken from the bank, in which case the bank has to bear the loss, and such matters often end up in court, the CIBIL score of the person is damaged. Due to which he may face a lot of difficulty in getting a loan in future.
Secured Loan Documents Required
For proof of identity – any one document from PAN Card, Passport, Aadhaar Card, Voter ID Card, Driving License is required.
For Age Proof – Birth Certificate, 10th Class Marksheet, Driving License or Bank Passbook.
For Residence Proof – Ration Card, Bank Passbook, LIC Policy Receipt, Passport or Utility Bill (Water Bill, Electricity Bill, Telephone Bill, Gas Bill).
For proof of income
For salaried person – 2 months old PAN slip, 3 years ITR (Income Tax Return), Form 16, certified letter, increment or promotion letter from employer/company.
For Non-Employed/Self-Employed Persons – 3 years Income Tax Return, C.A. Certified profit and loss statement and balance sheet by the company or farm, proof of professional practice for doctors and consultants, business proof information, registration certificate of business establishment.
For proof of property – allotment letter/purchase agreement, proof of no encroachment of property, receipt of payment made to developer in case of new house, all documents of previous property, copy of sale agreement, copy of payment to seller apart from receipt, other necessary documents can also be attached.
Passport size photograph.
Unsecured Loan Required Documents and Eligibility
Permission to drive
Two months salary slip
Employee ID Card
Applicant’s age should be between 21 to 67 years
Salary of applicant living in urban area should be 22,000 or more
Applicant’s CIBIL score should be 750 or above
How to Apply for Secured Loan (Secured Loan Apply Process)
To take a secured loan, first of all, you go to the bank of which you are an existing customer.
After this, you have to approach the bank officer, and get the information regarding the secured loan.
After this you tell the bank officer what kind of loan you want and how much amount.
Knowing your loan amount, the officer takes property details from you to clear the loan.
If the bank officer is asked by you
Eli calculates the amount according to your property, then the bank gives you an application form for loan application.
All the information asked in this application form must be filled correctly.
After this, you have to attach copies of all documents related to income, property, residence along with the form.
After this, submit this form to the bank officer.
Your documents are properly scrutinized by the bank officer, which takes a lot of time.
After verifying all the details, your loan is approved and the loan amount is disbursed in your account.
How to Apply for Unsecured Loan (Unsecured Loan Apply Process)
For unsecured loans, first you go to your nearest bank branch.
After this, you take the information from the bank employee to take an unsecured loan.
After knowing all the terms and conditions, get the loan application form.
In this form, you fill all the information correctly, and attach the copy of relevant documents with the form.
Submit the application form to the bank officer.
After proper verification of the form, your loan application is accepted.
After the loan is approved, the loan amount is transferred to your account.