Does Secured Loan Affects The Credit Score?
Many lenders send the activity of loan borrowing to your credit file. Initially, it may bring down your credit score. But with timely repayment, the effect on your score is then usually positive. And if you default on your loan, a record goes into your file, which would affect your credit score negatively. Visit https://money-wise.org/bad-credit-loans-missouri/ for details.
Unsecured Loan
Unsecured loan, also known as ‘signature loan’ because that is all required if you meet the lender’s term for borrowing. This loan on the other hand doesn’t require any collateral in order to borrow money. That points towards higher rate of interests ultimately unlike the former, because here the lender is at higher risk.
Features of Unsecured Loan
- Major Expenses: When planning for big upcoming expenses, unsecured loan is a no brainer.
- High interest rate and the maximum tenure is of 5 years.
- Credit history: A good credit history in between 650-850 would serve you with favorable loan terms and the interest rates, as the lender now knows your ability for timely repayment.
- Though there is no risk of losing collateral but at the same time the eligibility criteria is set tough by the lender
- Flexibility & Disbursal: Approval and disbursal takes very less time as compared to secured loans & offer flexibility for utilization unlike secured loans.
- Reliable Income: Although there is no collateralization, but you’ll need a stable source of income in order to avoid default on an unsecured loan.
What happens if you default on an unsecured loan?
Your credit score is ruined as the repayment activity is sent to an agency by the lender who further calculates your score. Thus, borrowing for another loan in future becomes difficult for you. Moreover, depending on the lender, they may reach out to the Country Court Judgement as a legal support for asking the repayment for the loan.
General requirement for personal loan:
For salaried-
- Age limit: 18-60 yrs.
- Minimum Income (may vary across the lenders): Rs.1500/month
- Minimum work experience: 1yrs. (6 month with the current employer)
For self-employed-
- Age limit: 21-65 yrs.
- Minimum income: Rs.15 Lakhs p.a.
- Business continuity: 2yrs. of business continuity
It is advised to keep a perfect credit score, preferably 750 or above as it takes a huge role in determining your eligibility for a loan
If you are having trouble getting loan approval and need money quickly, you may want to look for another option.
Instead of taking a small loan from a lender, friends and family might be able to help. Alternatively, a friend or family member with good credit can take out the loan, increasing your chances of eligibility. Same day loans are also popular but can come with very high interest rates.
