What is a collateral free loan?

To know about this loan we have to know what is collateral. Any precious item or any asset that can give guarantee of you returning money against the loan is called collateral or property or something that you agree to give to somebody if you can not pay back money that you have borrowed. In collateral-free loans the creditor is not required to put up any collateral. In plain terms, this ensures that even though you have nothing to commit or spend, you will contact a lender and borrow money at a fixed rate of interest.

Who is eligible to take a collateral free loan?

This scheme is not available for big finance bodies like factory owners, big businessmen, as they would need a big capital for their work to go on. That is why the company can not take such high risk to give these bodies a loan without any collateral. The one for whom this scheme is for employees, entrepreneurs, and owners of small and medium scale business. These are very helpful in the case of student’s educational loan, as it helps them to deal with present problems of finance and when they have passed their study they are eligible to pay back including some terms and conditions.

What are the benefits of getting a collateral free loan?

1) Loans are given at lower interest rate :-

The rate of interest you would have paid if you have taken a collateral loan, or even any other personal loan is comparably higher than that of what will you receive if you take collateral free loan, which makes it more suitable for people in need. The fact that is only for people who come in the category of employees, students, and small scale businessmen can take advantage of this. As they can not enjoy the other facilities of higher category people as in credit score and many more.

2) Flexible tenure:-

   The repayment period is adjustable, ranging from one to five years. This way anybody can arrange for the future without worrying much about the repayment. It is the best term for students, if you look from their perspective as they can study without worrying about having a financial fall and the time when they have to repay the sum they would have become well settled in life to pay that back. Thus they prefer this more than anything.

3) This loan is not subject to a credit check:-

   So in case you do not have any history of credit you can still get a loan with valid documents, and purpose. Which gives you assurance that anyone can take the loan irrespective of what job he/she used to do and irrespective of what his credit score is. You can get your loan sanction without much verification of your history in any other loans.

4) The process is simple and less time consuming:-

   For the record many will know that getting a loan sanctioned is a very time killing process. You do not know whether you can get it ready within some days as it includes various verification, clearance, and sometimes even your documents are not ready. In such scenario this proves a time saving process and easily available loan

5) Can get loan for business development:-

   You can apply for the loan if you have a startup idea or are trying to improve your work but can not because you do not have enough capital. There are no limitations for you guys as they want you to grow as much as you could, so then in return you can pay them back what they deserve. This is the general idea of collateral free loans that people grasp.

How can you apply for a collateral free loan and what after that?

1. First of all if you are using the loan for business purposes then you must begin operating your company, obtain the necessary permits, and register your company. You must also open a bank account and receive a PAN card for your company.  
2. To apply for the loan you must visit the bank website or NBFCs like Money View Loans and get the necessary details. It will be ideal for you if you can visit more than two banks for loan as it will give wider knowledge of where to invest and which bank can give you the most profit with less interest rate.
3. You must prepare a detailed work summary and other necessary report if you are going for business purpose and if as a student, you have to prepare your official degree, admission form with college mentioned and other required documents beforehand as if not at last moment you need to do a lot of work in short time to arrange and synchronise all of it.
4. Once you have completed submitting your loan forms and documents, then the bank will start doing its share of work and will give your asked money in the forms as soon as possible and will notify you about the tenure and EMI once again via post or any other medium.
5. Then after the completion of the tenure the bank will start taking EMIs and will timely notify you about your EMIs if not paid and may take some necessary steps if failed to do so. Thus it will be better if you could come up with a plan to repay the money borrowed.

Conclusion:-

1. It helps you in your tough time without even asking for collateral.
2. Give flexible tenure which you have a choice ranging from 12 months to 5 years.
3. Provide you with a lower rate of interest than any other bank even if you are taking it with a collateral.
4. Easy to get sanctioned.
5. No need to worry about your credit score.
6. No need to worry about any other problem from the bank before the tenure ends.

So, overall knowing it would not be wrong to say that collateral free loans are really helpful to lower and middle class people and on top of it you can see a bright future irrespective of what you were or what you are right now.