A financial emergency can occur at any time. You would apparently look for various options to get funds. In that case, a Personal Loan can be very helpful. Whether you need money for a wedding, vacation, home renovation, medical emergency, education, or another big-ticket expense, a Personal Loan can provide the necessary funds in minutes and solve your purpose. While most loan products require some form of collateral, security, or guarantor for backup, signature loans are a type of Personal Loan you can obtain without mortgaging any asset you own. Here is some more information about these loans and how they work.
What is a Signature Loan?
Signature loans are unsecured loans that do not involve any collateral, security, or guarantor for approval. As their name suggests, eligibility for a signature loan is entirely based on your promise to repay the borrowed amount on time. The lender lends you a loan based on your sign on the loan agreement. Besides that, they have no security to get their money back. Thus, they get their name: signature Personal Loans.
What is the Process for Signature Loan Application?
The process of applying for signature loans online is extremely simple and straightforward. You can log on to the lender’s website or download their loan app on a smartphone to apply for a loan from anywhere. Many lending institutions have digital loan procedures that do not involve any branch visits or paperwork.
To apply for a signature loan, provide a few details regarding your occupation, work experience, income, identity, contact information, etc. Next, scan and upload the required documents, including your identity, address, and income proofs. Wait for verification and accept the loan offer to get disbursal within a few hours.
Key Features of Signature Loans
Know these key features of signature loans:
Ample Loan Amount: A generous loan amount of up to Rs 5 Lakh is enough to cover most planned or unplanned expenses.
No End-Use Restrictions: Signature loans have no end-use restrictions, making them an efficient funding option for weddings, home repairs, vacations, medical emergencies, education, etc.
Competitive Interest Rates: Owing to the strong competition among loan providers, you can get reasonable interest rates based on your loan requirement, repayment capacity, DTI ratio, and other crucial parameters.
Instant Approval: Fast cash signature loans attract instant approval due to no collateral, paperwork, and branch visit requirements, making them ideal funding sources for unplanned expenses.
Flexible Repayment Terms: Flexible repayment terms of up to 60 months make EMIs easily manageable within your monthly budget. Use an EMI calculator to calculate EMIs for various loan terms and choose a tenure with EMIs you can conveniently afford.
Simple Eligibility Conditions: Your signature loan eligibility largely depends on your age, credit rating, work experience, occupation, income, and other components of the eligibility criteria. Check and ensure fulfilling them before applying to get assured approval.
No Collateral Requirement: As their name suggests, lenders lend signature loans based on your signature on a loan agreement alone, without involving any collateral, security, or guarantor.
What are the Benefits of Signature Loans?
- Enjoy these benefits by obtaining a signature loan:
- 24/7 accessibility without considering the lender’s working hours
- Digital loan procedure that you can complete from your home
- No branch visits involved
- Time and money saving
- No paperwork involved due to online documentation and verification
- Flexibility to choose a loan term with budget-friendly EMIs
- An opportunity to improve the credit score with regular repayments
What are the Eligibility Criteria for Signature Loans?
Fulfill these eligibility criteria for obtaining signature loans:
| Criteria | Particulars |
| Age | 21 to 58 years |
| Occupation | Salaried or self-employed |
| Work Experience | Six months for salaried, two years for self-employed |
| Citizenship | Indian |
| Income | Minimum monthly earnings of Rs 15,000 |
| Credibility | High credit score, low DTI ratio |
What are the Documents Required for Signature Loans?
Submit scanned copies of these documents to apply for fast cash signature loans:
- Application form
- Passport sized photograph
- Identity proof
- Residence proof
- Income proof
- Job continuity proof for salaried applicants
- Office address proof and business existence proof for self-employed applicants
Signature Loan vs Revolving Credit
Signature Loans are one-time amounts you may borrow when you need funds. On the other hand, revolving credit provides you with a credit limit that you can use anytime you want. When you borrow a signature loan, you receive the borrowed amount in a lump sum. While a revolving credit makes the credit available up to a limit, and you can withdraw only the required amount when necessary.
When you borrow a signature loan, you must repay it to the lender with interest within the loan tenure. However, with revolving credit, you must pay interest only for the amount you withdraw from the credit limit. The interest keeps accruing until you clear the balance. Interest rates are lower for signature Personal Loans than credit cards and other forms of revolving credit.
What are the Effects of Not Paying Signature Loans?
Signature Loans are collateral-free, which means you don't lose any assets even if you default on the loan. However, there are repercussions you must be ready to handle. These are the effects of not paying unsecured loans on time:
Increased Debt Burden: Paying a loan in EMIs is easier than making a lump sum repayment. However, if you default, your liabilities increase, and you must pay the entire outstanding balance with penalties. This eventually increases your debt burden.
Damaged to the Credit Score: A decent credit score eases your path to getting a signature loan. However, if you default on the loan, each missed EMI may decrease your credit score by a few points, impacting your eligibility for future loans.
Legal Action: Lenders go easy if you miss only a couple of EMIs. However, if you are a habitual defaulter, the loan company may file a case against you under section 138 of the Negotiable Instruments Act 1881. They also have the prerogative to file criminal charges against you under sections 403 and 415 of the IPC, 1860 against you.
Difficulty Obtaining a New Loan: Each EMI default will appear on your credit report. When you apply for another loan in the future, the lending institution will take it as a red flag and feel skeptical about approving your loan.
Conclusion
Signature loans offer the best possible solution when the cash flow is tight. Without any collateral requirement, an unsecured Personal Loan helps cover various expenses without end-use restrictions. Apply for one at a reputable NBFC like Hero FinCorp and get the best terms and conditions according to your eligibility.
Frequently Asked Questions
1. What is an example of a signature loan? A personal Loan for a wedding is an example of a signature loan. It is unsecured, has no end-use restrictions, and comes with ample loan amounts, competitive interest rates, and flexible repayment terms.
2. Is the signature loan fixed or variable? Signature loans have fixed interest rates, meaning your EMIs remain the same throughout the loan tenure.
3. Fees and Charges with Signature Loans Stay prepared to pay a few other charges with signature loans, including processing fees, cheque bounce charges, interest on overdue EMIs, and loan cancellation charges.
