Businesses of every size, small, medium, or big require funding at some point in time. The business world is unpredictable and the need for urgent funding here you go is often faced by businesses. In such situations, businesses often resort to unsecured loans.
This type of funding does not require any collateral or guarantee which means you do not have to surrender any of your valuable assets against the loan.
These unsecured business loans are given after analyzing multiple factors such as your credit score, financial documents, monthly income, etc.
These loans come in the category of high-risk loans because of the absence of collateral. Start-ups often take the help of these types of loans. Keep reading to discover interesting facts about these loans.
Unsecured loan’s interest rate and the principal loan amount
The average rate of unsecured loans could vary anywhere from 10 percent to 24 percent depending on the lending organization. The principal loan amount also varies from lender to lender, and you can avail of between 50 thousand to 1 crore. The interest rate depends on the borrower’s profile and the nature of the requirement. It includes your financial history, CIBIL score, repayment ability, creditworthiness, and the annual turnover of your business.
People take unsecured business loans when they venture into a new business or want to expand the current one. These loans give you the much-needed capital you want for your business so that you can realize your desired target.
Qualification
- You should attain age maturity at the time of applying for unsecured business loans. The proposed age is between 18 to 65 years. You should not exceed the maximum age at the time of closing the loan.
- You should have a credit score of 750 or more than that
- Your business should be operational for at least one year with a profit
- You should be earning every month
- You should submit your last 6 months’ bank statement
Features and advantages of unsecured loans
Some common features and benefits of unsecured loans are listed below. These features will remain the same whether you apply for an unsecured business loan in bangalore or any other location in India.
The flexibility of borrowing
You can enjoy the flexibility of borrowing with unsecured business loans. Whether you want loans for the short term or long term you can get the amount you require to run your business operations. There is no restriction in using capital. You can utilize the loan amount to serve different purposes in business. You can invest it to open a new branch in some other location, improve the infrastructure of your business, buy advanced equipment for inventory, or maintain cash flow.
Competitive interest rate
These loans come with attractive interest rates. To grab the lowest rate of interest you must compare the loan rates of different lenders, and this becomes easier if you do it online. However, the interest rate will be based on the amount you will borrow and your ability to repay it.
Freedom in repayment
The repayment duration of unsecured business loans could vary from 2 to 5 years, and you can pay off your debt without hurting your monthly budget. Usually, the lenders offer you comfortable EMIs cycles which you can align according to your invoicing and sales structure. Every business is different and hence the repayment cycles are designed by the lenders to suit the individual financial structure. This allows you to choose a repayment cycle that you can afford.
Easy documentation
Nowadays you can apply online for an unsecured business loan. You can quickly log into the lender’s website and submit the requested documents for the loan. Within a few days, it will be processed if you qualify for the eligibility criteria. The money will be disbursed directly to your account. This eliminates the long waiting period to get the loan. The representatives of the lending organization will update you about the status of your unsecured business loan.
No hassle of providing a guarantee
As already stated, an unsecured business loan does not demand any form of security to back the loan. This cuts down the risk of losing your assets in case you fail to repay the loan. However, in such situations, there will be some other legalities applied. As you do not need to pledge any of your important assets for example your home to guarantee the loan, this reduces much of your financial stress, and you can utilize your funds for your business.
Wrap up
Nowadays lenders customize unsecured business loans according to the individual business requirement of the borrowers. If you qualify all the criteria and maintain goodwill with your lender you can get an unsecured business loan at an attractive interest rate. In the process, your CIBIL score, and creditworthiness will play a great role in getting you the loan. So, prepare yourself well before you apply for an unsecured business loan in bangalore or anywhere in the country if you do not want to get rejected.
