Secured Loans

Secured loans are type of loans where the borrower pledges an asset (such as a property or a vehicle) as collateral to get the loan. Secured loans involve using an asset, like a property or a vehicle, as a guarantee to get the loan. If the borrower can't repay, the loan lender can take the asset to recover the loan amount. In case you are not willing to provide collateral for your loan, then a personal loan can be a viable option for you.

With Buddy Loan, you can avail personal loan up to ₹15 Lakhs under the interest rate of 11.99% p.a.

Secured Loan Interest Rates

Secured loan interest rates vary with factors like lender, collateral, borrower's credit, and market conditions. Backed by collateral, these loans often offer lower rates than unsecured loans because of the reduced risk of default.

Here is a list of various secured loan interest rates provided by the top banks in India:

Repayment Periods of Secured Loans

The repayment period for secured loans varies based on factors like loan amount, collateral type, borrower's creditworthiness, and the lender's terms. However, the table below displays the maximum repayment period for secured loans:

Collateral Types for Secured Loans

Collateral is an asset that is pledged as security for a loan. If the borrower defaults on the loan, the lender can seize the collateral and sell it to recoup their losses. There are many types of collateral that make it easier for borrowers to qualify for loans with favorable terms. Here are some of the most common types:

Real estate: This includes homes, apartments, land, and commercial property. Real estate is often used as collateral for mortgages, home equity loans, and business loans.

Vehicles: Cars, trucks, motorcycles, and boats can all be used as collateral for loans.

Investments: Stocks, bonds, and mutual funds can also be used as collateral for loans.

Savings accounts: Savings accounts and certificates of deposit (CDs) can be used as collateral for loans, but they typically have lower loan-to-value (LTV) ratios than other types of collateral.

Types of Secured Loans

These are types of secured loans that are favorable for different financial needs, allowing borrowers to leverage their assets to minimize risk for lenders through collateral.

Loan Against Mortgages: Typically used for purchasing homes or properties, mortgages are long-term loans secured by the property being bought. They usually offer lower interest rates because of the property serving as collateral.

Loan Against Mutual Funds: Borrowers can leverage their mutual fund investments to secure a loan, using the holdings as collateral to get financing for various needs.

Loan Against Property: Utilizing owned property, whether residential or commercial, as collateral to secure a loan amount based on the property's market value.

Loan Against Fixed Deposit (FD): This type of loan allows individuals to get funds by pledging their fixed deposit account as collateral, ensuring access to liquidity without breaking the FD prematurely.

Loan Against Car: Borrowers can use their owned vehicles as collateral to secure a loan, allowing them to access funds based on the vehicle's valuation.

Loan on Credit Card: Although not exactly a loan, secured credit cards require a deposit as collateral. They help individuals with poor or no credit history in establishing or rebuilding credit by responsibly using the card.

Secured Personal Loans: You can use assets like savings accounts, certificates of deposit (CDs), or valuable possessions as collateral for personal loans. These loans might be easier to get for individuals with lower credit scores.

Secured Business Loans: Businesses can secure loans by offering business assets (equipment, inventory, accounts receivable) or personal assets as collateral. These loans are commonly used for business expansion, working capital, or other operational needs.

Eligibility Criteria for Secured Loans

Collateral value, income verification, and repayment plans are key eligibility factors. Please refer to the table below to understand your eligibility for secured loans.

Secured loans provide an opportunity for individuals with low credit scores or no credit history to access financial help by offering valuable collateral.

Documents Required for Secured Loans

The documents needed differ for different secured loans such as home loan, car loan, business loan, mortgage loan, loan against mutual funds, FDs & more. Here, let’s go through the ingeneral documents that would be needed to get a loan.

Proof of Identity: Government-issued photo ID like an Aadhaar Card, Passport, Driving License, PAN Card, or Voter ID Card.

Proof of Address: Valid address proof such as Aadhaar, utility bills or rental agreements, passport, etc.

Income Proof: Documents like salary slips, bank statements, or income tax returns.

Passport-sized photographs.

Benefits of Secured Loans

Understanding the following advantages can help you make informed decisions when considering secured loans to meet your financial requirements:

Lower Interest Rates: Secured loans typically come with lower interest rates compared to unsecured loans because the collateral reduces the lender's risk.

Higher Borrowing Limits: Due to the security provided by collateral, borrowers can often access larger loan amounts than with unsecured loans.

Easier Approval: Secured loans can be more accessible to individuals with lower credit scores or limited credit history since the collateral mitigates the risk for lenders.

Extended Repayment Periods: Borrowers may enjoy longer repayment terms, making monthly payments more manageable and providing flexibility in budgeting.

Opportunity to Build Credit: Responsible repayment of a secured loan can positively affect one's credit score, potentially improving creditworthiness for future borrowing.

Various Collateral Options: A wide range of assets, such as property, vehicles, or savings, can be used as collateral, offering flexibility to borrowers.

Steps to Apply for a Secured Loan

Many lenders offer online platforms where borrowers can apply for secured loans. You can visit the lender's website or you can follow the steps below to have a better understanding:

Step 1: Visit the nearest physical branch of the relevant bank or NBFC (Non-Banking Financial Company) or access their website.

Step 2: Complete the application form, often available online on the institution's site.

Step 3: Submit essential KYC (Know Your Customer) documents like Aadhaar and PAN cards.

Step 4: Provide the income proof to support and collateral documents (as required) for your loan request.

Step 5: Include any additional documentation required by the institution for your specific loan application.

Step 6: Upon ensuring all documentation is in order, the loan will be disbursed promptly.

Understanding collateral types, eligibility criteria, and repayment details is crucial. Applying for secured loans can be done online or in person at financial institutions. Overall, secured loans present a valuable option for borrowers seeking financial help while mitigating risks for lenders.

However, availing personal loan without collateral can also be a viable option. And that's where Buddy Loan steps in, ready to assist you in connecting with the most suitable lenders precisely to fulfill your financial needs.