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If you need to borrow money, there are usually 2 types of loans available.
You can either get a secured loan, where you pledge a valuable asset such as your home or even gold. A mortgage is a type of secured loan. Or you can get an unsecured loan, which isn’t tied to an asset. This means the lender won’t be able to take away your collateral if you default on your repayments.
When you apply for an unsecured loan, you don’t have to pledge any of your assets as security. Instead, the bank, financial organisation or NBFC (non-banking financial company) offering the loan will review your financial credentials to assess your eligibility. This includes looking at your credit score, monthly income, debt-to-income ratio and other criteria.
Find out how to improve your credit score
This assessment also helps the lenders determine how much you can borrow.
As the loan applicant, you agree to repay the loan amount through EMIs (equated monthly instalments) until the end of the loan contract or until you’ve repaid in full. The EMI includes both the principal amount and the interest amount.
So it makes sense to look at your financial situation and have a repayment strategy before taking out an unsecured loan.
You can apply for various unsecured loans based on your needs. Some of the most common types are:
This is one of the most popular types of unsecured loans. You can use personal loans to cover large financial expenses, emergency or medical costs, or aspirational needs, such as travel and home renovation.
Find out more about applying for an HSBC Personal Loan, with annual interest rates starting from 9.99%.
As the name suggests, a loan for education purposes is for students or their parents to help cover costs like course fees, textbooks and living expenses. These loans often come with an affordable interest rate and the repayment period can only start after you complete the course.
A credit card loan allows you to get credit from the bank that issues your credit card against your available credit limit. This loan generally has a higher interest rate, so it’s advisable to use it only in an emergency.
If you don’t have a credit card, find out about the different types of credit cards and their features and benefits.
You can apply for a flexible overdraft facility (or personal line of credit) to help you with extra cash for unplanned and emergency expenses.
HSBC Anytime Credit can shield you from a bounced cheque or missing out on an EMI if you don’t have enough funds in your salary account.
If you're thinking about getting a new car, consider HSBC's Personal Loan for Electric Vehicle (EV). With this loan, you don't need to pledge your car ownership as collateral security, and there are no document charges.
One of the most important advantages of an unsecured loan is that you don’t need to provide any surety to get the funds you need. This makes it less risky as you won’t lose valuable assets if you’re late with your repayments.
There is a flip side to this, though. You can typically borrow more and get a lower interest rate with a secured loan. This is because the bank takes on less risk as it can repossess your home or the other assets you offer as collateral if you can't repay.
The application process and eligibility requirements for unsecured loans are simple and hassle-free. Here are some factors to consider:
Now that you know the meaning of unsecured loans, it’s important to research and consider your options before applying. And make sure you can afford the repayments before committing to a loan.
Are you considering a personal loan? Submit your details and an HSBC India representative will contact you with more information.
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