Unsecured business loans are becoming increasingly popular in India and not without a reason. Even though secured business loans have lower interest rates, just because there is a collateral offered, many are still opting for the unsecured loans for their business and this has also vastly affected the economy for the better in recent times. The ease of applying for the loan along with a number of other advantages, has made it possible for more people to apply and get approved for the loan. Here are some of the reasons why unsecured business loans are becoming popular.
- No Security: Unsecured business loan does not require any kind of security and so there is no need to mortgage an asset to get the loan. There are some lenders that insist on a security of some kind but a small business owner might not have such a property with him to offer as collateral in the first place. On the other hand, if his business has chances of doing well in future, it would be unfair to deny him the loan based on something he does not have already. Unsecured loans are free from such glitches and are fast becoming popular among SMEs.
- Fast Approval: Unsecured business loans actually get approved faster because all that time is not spent on evaluating the asset, which could actually take months. Hence, those who want the money faster are now opting for unsecured loans and if all is well, the loan can be approved in a two days or less.
- Less paperwork: In the same way, unsecured loans also involved much less paperwork. The documents have to submitted of course, related to one’s income and the other aspects like IT returns, TAN of the business and the sales tax documents but overall, it does involve a lot less paperwork.
- Flexible Repayment: Today unsecured lending are coming with flexible repayment options which is definitely an added perk for the small businesses and this makes repayment a lot easier. There are options like Flexi loans and Interest only Flexi loans. One can make the repayment according the convenience of the business and one can also make interest only payments and the principal amount can be paid later. The businessman has to worry less about defaulting and even if he wants to pay in advance, there are no prepayment charges to be incurred as well. Bajaj Finserv has very good repayment options to start with.
- Low interest: Even unsecured business loans have quite lower interest rates today. Some leading banks and NBFCs like Bajaj Finserv offer very competitive interest rate and a business that has a steady return will have no problem paying off the loan whatsoever. Business loan interest rate start from about 16% and can go up based on the credit history and performance of the business in the previous years.
- Multiple Options: There are a number of options that one can go for when they are applying for the loan. One can opt for short term or a long term business loan, one could opt for Line of Credit Loan, one could opt for conventional loan or a flexi loan- today there is a loan type for every kind of business and that makes it easier for the average business today to apply for the loan.
Hence, with all these advantages, it can easily be seen that unsecured loans have greatly increased in popularity. Today many SMEs and MSMEs in rural and semi – rural areas are coming forward to avail the loan and it is greatly enhancing the economy.