Types of Unsecured Loans Available In India

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An unsecured loan is one of the quickest and most convenient loans to avail to raise funds for a business emergency, make an expensive purchase, consolidate your debts, and much more. The easy application process, quick approval, and minimum documentation are just a few of the many reasons that make it a preferred loan option. But many of us are unaware of the fact that there are many types of unsecured loans offered in India. 

For any business, large or small, the need for operating capital is an important one for sustainable development. However, some enterprises, in their daily operations, frequently fail to devise strategies for financing through proper planning and find themselves in unwanted financial crises.

Why Unsecured Business Loans?

To start a business, refurbish an existing business or for further expansion and development, a business loan can be the best bet for business owners. A business loan can be used to fulfill working capital requirements, purchase equipment or machinery, expand business cash flow, and much more.

But while you are already in a financial crunch, pledging collateral can put you in even more distress. You would not want to put your asset at stake for a short-term loan you want for your business. This is where unsecured loans can come to your aid. You can get a loan without pledging any collateral.

Types of Loan

#1: Revolving Loan

A revolving loan is a loan with a credit limit, implying the maximum sum of money/maximum aggregate capital which can be withdrawn by a borrower at any given time and any such specified time period. 

The borrower can repay the amount either partly or fully in between and then withdraw again within the specified limit. After the specified period ends, the borrower has to refund the amount and any interest applicable on the withdrawn amount. The revolving loan provides flexibility and ease of procuring funds and is offered at a variable rate of interest. For instance, credit cards and overdrafts are popular examples of revolving loans. 

#2: Term Loan

Under a term loan, the borrower receives a lump sum amount, which needs to be repaid in fixed installments, as per the loan agreement till the end of the loan tenure. Borrowers prefer such loans for their long-term investment or purchase of fixed assets. Terms loans normally have fixed interest rates.

#3: Top-up Loan

A top-up loan is an additional loan offered over and above a pre-existing loan. Your pre-existing loan and the top-up amount would be consolidated into a single loan with one single EMI repayment mode. Such loans are helpful if you require further funds over your existing loan.

#4: Invoice Financing

You can avail fast cash from the invoice financing companies based on the outstanding invoices associated with your business. You can enjoy up to 85% of the outstanding invoice. In case the invoice remains unpaid, you are charged a factor fee on a weekly basis.

Summary

Unsecured Loans are offered by almost all banks and other financial institutions. You can easily apply for a business loan online. Find the one that suits your business needs and requirements and then apply for the business loan. All you have to do is go to the official website of the bank or lender and fill out an online application form for a business loan. If the lender considers you to be eligible for the loan, you will get it soon.