Quite often individuals who are cash-strapped seek finance from external sources like banks and lending institutions. Most lenders require collateral to be kept against education loans, used car loans, and even home loans. Such collateral acts as a security against the loan in case the borrower defaults on his regular payments.
What is collateral?
Collateral is an asset that is pledged as security for loan repayment. In the event of a default, the borrower forfeits the asset. This is done so that the lender may recover his losses in such cases. The value of the asset must meet or be greater than the loan amount. Loans that are borrowed by pledging collateral are known as secured loans. These loans have a lower rate of interest as the lender’s risk associated with such loans is less.
Are personal loans secured loans?
Personal loans are generally unsecured loans, which mean that no collateral is required to be kept against the loan. Such loans are highly beneficial for those loan seekers who wish to avail of finance but do not have any major asset holdings, like land or property. It is a great option for those who do not want to pledge any assets as security or do not have any assets to pledge.
An important point to keep in mind with unsecured loans is that you may not always land the best rate as compared to secured loans. However, many banks and lending institutions now offer unsecured loans with attractive and competitive interest rates.
Does Tata Capital offer unsecured personal loans?
Tata Capital personal loans are unsecured that is these not require any collateral, wherein the underlying asset is mortgaged. Furthermore, such loans do not require a guarantor. A guarantor is a person or an entity who guarantees to pay if the borrower fails to make regular payments. In other words, a guarantor is responsible for the borrower’s debt.
Besides the above-mentioned benefits, Tata Capital loans have numerous other advantages. Such loans require minimal paperwork as compared to other loans. Besides, Tata Capital also offers flexible repayment schemes based on the cash flow of the borrower. Some of the repayment options include Step Up Plan, where borrowers may increase their regular Equated Monthly Installment (EMI), or Step Down Plan, where borrowers reduce their monthly repayment amount. The Bullet Flexi EMI scheme allows borrowers to prepay the loan amount in parts at periodic intervals. Such schemes provide a high degree of flexibility and customization to the borrower.
It is necessary to understand all the aspects of a personal loan before applying for one. Individuals must consider if the collateral is required, various fees and charges, as well as the procedure for application. They must also keep in mind the eligibility criteria and documentation required before applying for a loan so as to make a sound borrowing decision.