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.
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Purpose of Secured Loans
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:
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:
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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
Home Loan
Car Loan
Business Loans
Benefits of Secured Loans
The secured loans offer a number of benefits for the borrower. Some of these are:
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.
How Can I Apply for a Personal Loan Online?
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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
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FAQs
Why should one go for a secured loan?
Secured loans are the best option for many reasons. The loan can be taken up to the value of the property. The borrowers get low interest rates and they can pay back the loan amount over a period of time. Moreover, applicants who do not have a strong credit history can get the loan easily.
What happens to the mortgaged asset if the applicant is unable to repay the loan?
If the applicant is unable to repay the loan, then the mortgaged property changes hands. The bank / lender become the new owner of the property and they choose to sell or rent the said property in order to recover their losses.
Is there a penalty on late EMI payments?
Yes, banks charge a penalty on late EMI payments. Therefore, it is advised that applicants make their repayments on time.
Is there a charge on prepayments?
Banks have certain conditions on prepayments. For instance, banks will charge a penalty on prepayments if these payments are made within a six month period. But, they might not charge anything if the prepayment is made after six months from the date the loan was taken. Readers should note that most home loans do not have a prepayment fee. They should contact their bank for more details on these charges, if any.
What is the maximum amount that can be borrowed?
In secured loans, the amount of loan that can be borrowed depends on the value of the property that has been mortgaged. The loan amount can either be equal to or less than the mortgaged property. It, however, cannot exceed it. In most cases, the amount of loan does not exceed 85% of the market value of the asset or property.
What is the eligibility criterion for availing a secured loan?
The applicant must be at least 18 years of age and a resident of India. They should have a minimum salary income as prescribed by the bank. If they have their own business, then the business should be operational for at least 3 years. The loan amount cannot exceed the value of the asset. Salaried, non-salaried and self-employed individuals can apply for a secured loan.
What is an EMI and how is it calculated?
Equated Monthly Instalments (EMIs) are monthly payments that the applicant pays in order to foreclose their loan. The EMI amount is calculated based on the principal amount, rate of interest and the loan tenure. The EMI calculator is an online tool that can be used to ascertain the EMI amount. Once the EMI amount is known, the applicant can plan their expenditures accordingly. You can use the Paisabazaar EMI tool to understand better how much loan you should take and the EMIs that you will have to pay, among others.
What is the difference between fixed and variable rates of interest on secured loans?
In a fixed rate of interest, the EMI amount remains the same. However, in a variable rate of interest regime, the EMI amount fluctuates as the rate of interest keeps changing. This makes this rate of interest comparatively unpredictable.
What are the different uses for which one can use secured loans?
Borrowers can use secured loans for different reasons. People who need a home, for instance, can take a home loan while those who need a larger sum for business or other personal reasons can use a loan against property. In most cases, except for loan against property that can be used for multiple reasons, the end use of the secured loan is defined by its type. For example, you cannot use a car loan for anything else other than purchasing a car.
Personal Loan Articles
View All ArticlesPaisabazaar is a loan aggregator and is authorized to provide services on behalf of its partners.
The APR (Annual Percentage Rate) of a personal loan is its annualised cost of borrowing, which includes the interest rate as well as the processing fees, documentation fees and other fees charged during the loan origination. The APR is expressed in the form of a percentage and thus, allows personal loan applicants to detect personal loan schemes offered at lower interest rates but with higher processing fees and/or other charges.
The APR of personal loans usually ranges between 11.29% to 35%. For example, assume that you have availed a personal loan of Rs. 5 lakhs @ 10.50% p.a. with a repayment tenure of 5 years. The processing fee charged for this loan is 1.5% of the loan amount, which amounts to Rs 7,500. Therefore, the total borrowing cost of your personal loan will be Rs 1,52,317 and its APR will be 11.16%.
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