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15 Oct

All You Need To Know About Eligibility Criteria For Collateral Free Loans

Collateral-Free-Business-Loan
Collateral-Free-Business-Loan

Loans are generally segregated under the category of Unsecured or Secured loans. Loans backed by any kind of security in any asset-form falls under the category of secured loans. On the contrary, if a loan is not supported by any security, and is imparted based on the creditworthiness of the loan seeker alone, it tends to fall under the category of unsecured loans, also known as collateral-free loans. It is believed that banks generally provide collateral-free loans to their existing customers. Due to the same, there emerges no requirement related to the documentation. 

Collateral free loans are also known as pre-approved loans that are unsecured. Moreover, they remain valid for only a specific period. In simple words, there is no requirement to put financial liquidity at stake when there is available a lucrative option in the form of availing a collateral-free loan for diversified purposes. 

Also Read: Pros & Cons Of MSME Loans In India

They may include higher studies, weddings, asset acquirements, home purchases, medical obligations, and many more. However, before seeking a collateral-free loan, one needs to be aware of one’s financial situation to ensure the stress-free repayment. Considering the same, it becomes indispensable to figure out about the know-how not merely related to the paperwork involved but also about the eligibility criteria. If you too have been considering availing this loan for any purpose, here knows everything about the eligibility criteria for Collateral free loans:-

Decent Credit Score

The first and foremost prerequisite to avail of a collateral-free loan is a decent credit score possessed by a loan seeker. There is no difference between normal loans and collateral-free loans except for the fact that in the later counterpart, the bank itself approaches individuals to offer loans in the majority of the cases. This further implies that based on the positive assessment of creditworthiness, banks decide to approach individually to offer such loans. This itself goes on to suggest that without being equipped with a decent credit score, no lending institution is going to consider an entity for availing a business loan.

Also Read: Common Challenging Experiences Faced During Taking A Business Loan

Decent Amount Of Bank Balance

Though financial institutions show an inclination towards imparting loans to their existing customers, that does not mean that they turn down the request of the non-existing customers for the same purpose. This is where; the role of bank balance comes in the picture. Lenders tend to request for presenting bank statements (generally six months) to gain an inkling regarding the average amount of the bank balance to obtain a clue regarding loan-seekers repayment capacity further. 

Also Read: A Brief Guide About Online Business Loan Lending: The E-Way

Stable Income

Undeniably, when it comes to avail collateral-free loans, lenders tend to ask for previous months’ salary slip in the case of working professionals to ascertain the loan seeker’s repayment capacity. In the case of business persons, lenders tend to ask for Income Tax returns of the former three years along with the business profile, balance sheet, and P/L account. Naturally, those who enjoy a constant flow of stable income tend to enjoy a hassle-free loan experience. 

Also Read: Why Choose NBFCs Over Banks For A Business Loan In India

ID Proofs

Despite fulfilling all the aspects revolving around the eligibility criteria, if a loan seeker fails to present ID proof, lenders will never consider granting loans. Under the definition of ID proof, PAN Card, Driving License, Aadhar Card, and Voter ID Card. Under the category of address proof, there comes Valid Passport, Aadhar Card, Property tax bill, Utility bill, and many more. In the absence of the required ID Proofs, there is no way that lending institutions are going to consider imparting collateral-free loans.

Also Read: 5 Reasons For Travel Agencies To Seek Business Loans

Excellent Repayment Record

The repayment track record or rather say one’s credit history prevailed by the earlier borrowings (if any) of a loan seeker serves as an instrument to access the loan seeker’s creditworthiness. If a loan-seeker has failed to re-pay any payment in the past, the lending institutions will come to know automatically as the credit rating agency immediately downgrade the credit rating due to the non-repayment of loan or interest. 

Substantial Saving History

Naturally, lenders intend to impart loan to further claim it back along with the specified interest. The majority of the lending institutions grant a loan based on a specific income slab of a loan applicant. Higher the income, the easier it becomes to apply for the loans featuring a large sum of amount that too characterised by the longer tenure.

Also Read: Business Loan Denied? Here’s What You Should Do Before Reapplying.

A person with greater working-age by his/her side combined with the minimum work experience is more likely to secure a loan characterized by the long-term in comparison to either a fresher or a retired individual devoid of any stable income source. Generally, the age criteria range from 21 to 60 years of age. 

There are the following aspects that a loan-seeker needs to take care of before availing collateral-free loans. 

  • To ascertain pre-closure and pre-payment charges. 
  •  To discover about zero processing fees.
  • To conduct a comparative analysis of interest rates and features offered by multiple lenders.

Also Read:4 Reasons Why Unsecured Business Loans Have Emerged As The Lifeline Of Small Businesses In India

Conclusion

Checking eligibility in the advanced digital era no more requires a hefty amount of time. A loan seeker may simply check it via Net banking account. If not, by paying a visit to the bank, one can access on-spot consultation regarding the same. It is crystal clear that Collateral free loans are generally granted to those entities that enjoy a decent credit rating. Mostly, it is offered by diversified financial institutions, including banks, fintech lenders, and NBFCs. Those who are toying with an idea to avail the collateral-free loan may approach these institutions directly, or they may seek the assistance of online sellers like Indifi.com that makes it extremely effortless for their clients to avail such loans. 

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