A collateral is a form of security given by a borrower to the lending financial institution (bank or non-banking financial companies). The borrower can pledge any asset and get a certain amount of money as a loan. The lending institutions demand collateral because of the risk of default they perceive while granting the loan amount. It is very difficult to find an asset which is good enough in quality and quantity. The asset to be given as a collateral has to be as per the norms of the lending financial institution (bank or non-banking financial companies). The borrowers can not pass on anything they want to. The lenders have some specifications. When in need of funds, finding security worth pledging can be a lengthy task. Not everyone is well equipped with the resources and time required to do so. A borrower can always rely on personal loans in such a scenario.
A personal loan is a collateral-free loan i.e no security required to get funds. A personal loan is readily available for those who meet the eligibility criteria of age and income. The minimum age required is 21years and the minimum limit of income varies depending on the lending institution (bank or non-banking financial companies). The source of income of a borrower must be stable and the employment history should be as clean as a whistle. There is a myth among the borrowers that an unsecured loan is generally accompanied by tremendously high-interest rates. The personal loan interest rates are not as high as what people consider it to be. It is merely high when compared to secured loans and is lower in comparison to other forms of credit. A lending financial institution (bank or non-banking financial companies) when giving a loan without collateral considers the credit score of the individual or entity. The credit score is a three-digit summary of the credit history of the borrower. The range of this score starts from 300 and goes up to 900. A higher score implies that the borrower has not made any delay or default in payment of credit taken in the past and this means the lender does not have to worry about the borrowers making defaults in the future. A low score can have an unpleasant impression but the individual won’t be given a cold shoulder. They can also apply for a personal loan but with a co-applicant. A credit score is a crucial factor on which the decision of the lending financial institution depends.
HDFC personal loan policy comes with paramount importance for the convenience of borrowers. No complex procedures or hefty paperwork required. The personal loan interest rates that are levied under the HDFC personal loan policy start from a nominal rate of 10.75% per annum.
With a personal loan, the borrower will have the option of providing security. In case a borrower does not have collateral the loan can be availed without it, and if the borrower wants to pledge collateral then the loan can be given against the value of the collateral. It is entirely the decision of the borrowing individual or entity.
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