Unsecured loan is a loan for which no property or anything else is required to be mortgaged for approval. Unsecured loans are given on the credibility of the customer and sometimes it is also called personal loan. Such loans are very much liked by small and medium traders, who do not have enough property or anything to keep as a guarantee. Unsecured business loans depend on the income and credit history of the customer and not on the assets. In such a loan, if the buyer stops paying, then the lender has no right to take possession of his properties. Unsecured loans are also called signature loans because they only require your signature on the loan agreement. Customer promises and signatures act as collateral. In this, you promise to pay the loan but do not pledge any property.
What is the eligibility for an unsecured loan?
In such loans, customers only have to fulfil the eligibility and rules for the loan. The Eligibility Criteria is something like this.
1. To apply for an unsecured loan, the credit score of the customers should be very high. A credit score is a statistical representation of a customer, showing the customer’s ability to repay the loan and reliability.
2. The second condition is that the business has been in two years and the previous year’s sales should be at least 5 lakhs. Along with this, last year’s income tax return should be at least Rs 1.5 lakh.
3. Apart from this, you must have a home or business premises so that you can apply for unsecured business loan in NBFC.
What are the different types of unsecured business loans?
Term loan: Term loan is a type of unsecured loan, which customers repay in equal instalments till the end of the term.
Machinery loan: It is very important to bring changes in technology. To make good quality, machines in business should be upgraded. For this a big investment is required and traders can take a machinery loan, which is a kind of unsecured loan.
Working capital loan: To meet the daily expenses, companies take a working capital loan. Due to this, money comes in regularly and everyday expenses are also met.
How do unsecured business loans work?
Unsecured small business loans are suitable for small and medium traders, whose credit score history is excellent. And they do not want to keep any kind of thing as a guarantee. This is completely different from secured business loans. In it, you have to keep some property with the lender as a guarantee. It is important to state that unsecured loans are risky for the borrowers because in the name of guarantee they have only the signature, trust and promise of the customer.
If the customer could not qualify for the unsecured business loan?
He will need a co-signer: in some cases the customer’s credibility is not satisfactory. In such a situation, the lender asks the borrower to bring a co-signer, which guarantees that if the borrower is unable to repay the loan, he will repay it. Therefore, make such a person your co-signer.
He should take less loan: If there is a difference between your income and debt ratio, then you should take a small loan. Because EMI of small loan will also be less. So take a small loan and repay it quickly in a fixed period.
Documents required for Unsecured Business Loans:
If you are thinking about taking an unsecured business loan, then you will also have to submit some documents. These documents are:
– Business or home address proof
– Pan Card
– Last 9 months bank statement to show credibility to lender
– Income tax return proof of last two years