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Secured Loans

Secured loan is a credit facility where the applicant pledges a collateral against the loan availed. In case of any default the lender seizes the collateral and sells it off to recover the remaining loan amount. Due to a collateral involved, lenders usually offer lower interest rates, longer repayment tenure and larger loan amounts to the prospective borrowers.

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Step 1: Enter your mobile number in the application form

Step 2: Provide your personal details

Step 3: Enter OTP to verify your mobile number

Step 4: Select the loan purpose and loan amount

Step 5: Compare offers and apply for the best-suited loan

Purpose of Secured Loans

These loans give an opportunity to applicants to get the necessary finance on better terms. Since the applicant has pledged an asset to avail the loan, it puts them in a comfortable position as they can bargain for lower interest rates and flexible tenures, as compared to an unsecured loan. In addition, the applicant can get higher loan amounts based on the value of their collateral.

Types of Secured Loans

Features of Secured Loans

The features of each specific secured loan differ from one another. However, they have a few general characteristics in common:

  • Asset Required as Collateral: It is taken against a property or asset which is given as collateral. The loan can be up to 85% of the value of the property.
  • Low Interest Rates: When compared with unsecured loans, the interest rates for these loans are much lower. This is because banks face lower risk in case of default.
  • Available for All: It can be taken by salaried as well as non-salaried individuals, as well as proprietorship and corporate businesses.
  • Customisable: The loan can be customised according to the applicant’s needs. For instance, the loan offers flexible repayment options. Additionally, the applicant can choose the type of interest they want. Most banks offer a mix of fixed and variable interest rates. Banks also offer flexible loan tenures.
  • No Guarantor Needed: There is no need for a guarantor for this loan.
  • Quick Processing: The processing and approval are quicker.
  • Improves Credit Score: Timely repayment of the loan improves your credit score.
  • Possibility of Asset Takeover: Banks and lenders can repossess your assets if you fail to repay your loan.

Eligibility Criteria for Secured Loans

As with the features, the eligibility criteria are different for each specific type of secured loan. However, they do have some common criteria. For instance:

  • The applicant must be at least 18 years of age.
  • The applicant must be a resident of India.
  • The asset put up as collateral must be the same or exceed the value of the loan.
  • In case of a business loan, the business in question should have in operation for at least 3 years.
  • Salaried, non-salaried and self-employed individuals can apply but need to meet the specific criteria needed for each.

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Documents Required for Secured Loans

The following documents are required for different types of secured loans:

Mortgage Loans / Loan Against Property

  • ID Proof: Copy of one of the documents: Voter Card / Aadhaar Card / Passport / PAN Card
  • Age Proof: Copy of one of the documents: Passport / Driver’s License / Aadhaar Card
  • Residence Proof: Utility Bills / Rent Agreement / Passport
  • Income Proof: Salary slips for the last 3 months. Banks also ask for IT returns and / or Form 16
  • Bank Statement: Bank Statement of the last 6 months that have been duly authenticated
  • Proof of Signature: This is done to authenticate your signature on documents
  • Property Papers: Original documents of the property that has been put up as collateral
  • Passport size photographs
  • Duly filled application form

Home Loan

  • ID Proof: Copy of one of the documents: Driver’s License / Aadhaar Card / Passport
  • Age Proof: Copy of one of the documents: Passport / Driver’s License / Aadhar Card
  • Residence Proof: Copy of one of the documents: Utility Bills / Passport / Lease Agreement
  • Income Proof: Salary slips of the past 3 months in addition to IT returns and/or Form 16
  • Bank Statement: Authenticated statements of the past 6 months are needed
  • Proof of Signature: This is done to authenticate your signature on documents
  • Property Papers: All property papers in their original form need to be submitted to the bank
  • Passport-size photographs
  • Duly filled application form

Car Loan

  • ID Proof: Copy of one of the documents: Voter Card / Aadhaar Card / Passport / PAN Card
  • Age Proof: Copy of one of the documents: Driver’s License / Passport / Aadhaar Card
  • Residence Proof: House Tax Receipt / Electricity Bill / Water Bill
  • Income Proof: Salary slips of the past 3 months / IT returns / Form 16
  • Bank Statement: Authenticated bank statement of the previous 6 months
  • Proof of Signature: This is required from the bank
  • Passport-size photographs
  • Application form, duly filled

Business Loans

  • ID Proof: Copy of any one of the following documents: PAN Card / Driver’s License / Aadhaar Card
  • Residence Proof: Copy of any one of your Telephone Bill / Lease Agreement / Electricity Bill / Water Bill
  • Company Profile: Information regarding the company’s products and services
  • Financials: The balance sheet and profit and loss accounts of the company for the past 3 years.
  • IT Returns: The IT returns filed by the company for the last 3 years
  • Bank Statements: The bank statements for the last few months are needed
  • Management: Profile of the promoter
  • Property Papers: Original documents of the property if put up as collateral
  • Passport-size photographs
  • Application form, duly filled

Benefits of Secured Loans

The secured loans offer a number of benefits for the borrower. Some of these are:

  • Low Interest Rates: Since the loan is taken against collateral, the bank can offer loans at low interest rates. This is because the mortgaged property minimises the risk, so the bank has faith in the repayment capacity of the applicant.
  • Higher Amount of Loans: Large loans can be taken based on the value of the property that has been put up as collateral. It must be noted though, that the loan amount cannot exceed the value of the mortgaged property (in most cases, the upper limit is 75-85%).
  • Quicker Processing and Approval: The loan procedure is not time consuming. Quick processing and approval make this a comfortable experience.
  • Flexible Loan Repayments: Secured loans give the applicants multiple ways of repaying the loan. The applicant can pay back the loan through ECS mandated EMIs or post-dated cheques, for instance. They can also prepay their loan if they have additional money on them.
  • Bad Credit Score Applicants: Individuals with a bad credit score can also avail this loan. Timely payment of a secured loan will greatly boost the credit score of the applicant. Here are the top 5 alternatives for Bad Credit.
  • Tax Deductible: In case of home loans, the interest on the loan is tax deductable. This will save the applicant a lot of money.
  • Low Minimum Income Standard: The minimum income bar for secured loan applicants is low. This is because the applicant has already assured the bank of their repayment capacity by mortgaging their property.

Points to Note for Secured Loans

Though secured loans are a great way to finance large purchases, there are certain factors that one must keep in mind when they take such a loan.

  • Collateral: In a secured loan, a property or asset has to be kept as collateral in order to avail a loan. If the applicant is unable to repay the loan, then they will end up forfeiting the said property.
  • Paperwork: This loan requires more paperwork than an unsecured loan. This may make the whole process cumbersome for certain applicants.
  • Loan Based on Collateral: The loan amount taken can only be up to a certain value of the asset or property that has been kept as collateral. This limits the amount of loan that an applicant can borrow.
  • Full Owner of Property: The applicant must be a complete owner of the property that has been kept as collateral.
  • Floating Rate of Interest: The EMI amount paid on a floating interest rate fluctuates. This is because on a floating rate of interest, the rate of interest keeps changing based on the market conditions and RBI policies. This creates problems for loan applicants as their EMI amounts will keep going up and down. This may disrupt the applicant’s expenditures and budget.
  • Lender at an Advantage: In a secured loan, the lender is always in an advantageous position. The deal is tilted in their balance. It does not matter whether the applicant is able to pay back the loan or not, as the lender will recover the cost.

How Can I Apply for a Personal Loan Online?

Get up to ₹40 Lakh in 5 Simple Steps

Step 1: Enter your mobile number in the application form

Step 2: Provide your personal details

Step 3: Enter OTP to verify your mobile number

Step 4: Select the loan purpose and loan amount

Step 5: Compare offers and apply for the best-suited loan

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