Hey Folks! Your host and ghost, Loan Singh is here with today’s blog post. Today, we discuss the twins born to banking & lending – Secured and Unsecured loan. I definitely needed to discuss this as we get plenty of confused queries with regards to the meaning of secured loan and its difference from an unsecured loan. Both are, as their name suggests, categories of a loan. But, they differ in both application process and terms of the agreement. Let’s get started with the basic definition or meaning of a loan, and then dissect secured and unsecured loan individually.
A loan, in simple terms, is an arrangement between lenders (someone who lends money) such as a bank or Loan Singh and a borrower (a salaried individual such as you) like you and me. You as a borrower agree to repay the money (along with interest) back to the lender within a determined time period or tenure. The lender can ask for collateral to be included in the agreement to bear the risk of default in repaying the loan. If no collateral is asked, then the lender would look at your credit history information to estimate whether you are capable of fulfilling your loan EMI payments responsibly. This is what Loan Singh does. Loans offer a way for banks to grow their overall revenue with the help of fees and interests they charge.
The terms of a loan agreement are signed by both the lender and the borrower, before any money exchanges hands. The terms of loan need to specify the
- Loan amount
- The interest that the lender will levy
- The monthly EMI repayment amount and
- Any collateral if stipulated by the lender
A loan can be availed for a number of purposes such as
- Buying a brand new vehicle
- Buying a home
- Starting a business
And cover personal expenses towards
- Medical bills
- Home improvement
- Online shopping
- Second-hand vehicle
- Travel holiday
The interest rates charged for availing a loan can either be fixed (remains constant for the tenure) or variable (change over time). If you cannot avail the loan due to low income, then a co-applicant can furnish his/her income information to get the loan. In case the primary borrower doesn’t pay the loan back, the co-applicant is liable to pay the loan back to the lender.
A loan comes with a repayment schedule which tells you when and how much you need to till the loan is cleared. Monthly payments are called EMI which is decided between you and the lender. You can choose from a number of repayment options depending on your circumstance. You could do an accelerated repayment, step up or step down repayment or balloon repayment. Digital lending platforms allow you to clear off the penalty ahead of the tenure completion. Banks, however, charge a prepayment penalty to do the same. Tracking the loan EMI payments is important to know how much you have already paid and how much is still pending.
Loans typically are of two types – Secured and Unsecured loans. Let’s take a closer look at the two.
Secured Loan Meaning
These are loans that are protected by an asset or collateral. The purpose of the loan can itself be used as collateral. For e.g. house for a home loan or vehicle etc. The bank will hold the title or deed for the collateral until the loan is paid in full including interest. A large amount of money can be availed using a secured loan because the lender feels safe to approve the loan with the collateral in hand. You as a borrower will try to clear off the loan as quickly as possible to get the complete ownership of the asset or collateral. A secured loan is generally offered with low-interest rates due to the decreased risk involved and higher borrowing limits with longer repayment terms. Vehicle or home loans make use of the new vehicle or new property as collateral. Some more examples of a secured loan are:
- Gold loan
- Loan against insurance policies
- Loan against bank FDs
- Loans against PPF
- Loans against EPF
- Loans against shares
Secured Loan Benefits
- Larger amounts
The loan amount which can be availed is usually larger because of the presence of collateral.
- Interest rates
The interest rates for a secured loan are less.
The tenure is medium to long-term.
The monthly installment amount is less due to the tenure being longer.
Unsecured Loan Meaning
For an unsecured loan, the bank or lender does not ask for any form of collateral. An example of an unsecured loan is a Personal Loan. As there is no collateral, banks or digital lending platforms look at the borrower’s creditworthiness by evaluating their credit history. A personal loan can be availed for personal expenses such as medical, travel, home improvement, shopping, wedding etc.
The borrower has to be salaried, possessing an Aadhaar Card, PAN Card and 6 months bank statement. Banks do not approve a personal loan if the borrower has never availed any credit prior. Loan Singh on the other hand, will still provide an online personal loan for a borrower with no credit history but the borrower has to be working for at least the last 6 months.
The loan application process for Loan Singh is easy and hassle-free. The entire loan journey from the application process to repayment of EMIs happens online. Personal loans are short-term loans. Some more examples of an unsecured loan are credit cards, student loans, and P2P (peer to peer) loan.
Unsecured Loan Benefits
- No collateral
Loans approved by evaluating borrower’s creditworthiness
- No stress
With no collateral involved, there is no fear of losing your assets.
- Simpler process
Time and paperwork towards collateral verification are removed. Creditworthiness is evaluated and the loan is processed.
- Multiple purposes
You can get a personal loan for a number of reasons such as relocation, medical expenses, home improvement etc.
Loan Singh is a digital lending platform that prides in providing an unsecured online loan to salaried individuals. You can apply for instant funds with instant approval. An easy emergency loan can be availed in the form of a personal loan, which is not a bank loan. You receive a low personal loan interest rate. This instant loan, which is basically a quick loan, can be paid via easy EMI and can be availed for a number of loan purposes such as:
- Home improvement loan/Home renovation loan
- House repair loan
- Marriage loan/ Wedding loan
- Medical loan
- Second-hand car loan
- Second-hand bike loan
- Second-hand vehicle loan
- Consumer durable loan
- Vacation loan
- Shopping loan
- iPhone loan
- Debt consolidation loan
- Credit card refinancing loan
- Job relocation loan
- Travel loan
- Festival loan
You can calculate your easy emi using our personal loan emi calculator. We accept bank statement, PAN, and Aadhaar for instant loan pre-approval. A bad credit score or credit report errors can lead to personal loan rejection. Personal loan defaulter consequences can also ruin your credit score. Improve your credit rating by avoiding emi repayment default. The ‘Loan Singh Blog’ is one of the best finance blogs in India.
Loan Singh’s Online Presence
Loan Singh is not an anonymous digital platform. We are present on almost all leading social media platforms. All you need to do is look for us. Some destinations you can find us on are:
- Loan Singh on Facebook
- Loan Singh on Twitter
- Loan Singh on Youtube
- Loan Singh Pinterest
- Loan Singh on Instagram
- Loan Singh Blogarama
- Loan Singh Google Review
- Loan Singh Medium Blog
- Loan Singh Reddit Blog
- Loan Singh Tumblr Blog
- Loan Singh Scoop It Blog
- Loan Singh Storify Blog
- Loan Singh Digg Blog
- Loan Singh Blogger
- Loan Singh Lymelight
- Loan Singh Justdial