ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -An Unsecured Loan is a loan that does not require you to provide any collateral to avail them. It is issued to you by the lender on your creditworthiness as a borrower. And hence, having an excellent credit score is a prerequisite for the approval of an Unsecured Loan.

Detailed explanation-2: -In an unsecured loan, a lender provides money to a borrower without any legal claim to the borrower’s assets in case of default. This means the lender has to depend solely on the borrower’s financial capacity and creditworthiness for repayment.

Detailed explanation-3: -An unsecured loan requires no collateral, though you are still charged interest and sometimes fees. Student loans, personal loans and credit cards are all example of unsecured loans.

Detailed explanation-4: -You can qualify for an unsecured loan by maintaining a decent credit score, borrowing history, and income. Fortunately, there are even unsecured loans that are designed to help borrowers with low credit scores. Unsecured loans are ones that don’t require any collateral.

Detailed explanation-5: -The main advantages of an unsecured loan include: You don’t have to leverage any of your assets to secure funds. Your loan approval may be completed faster because there are no assets to evaluate. Unsecured loans may be a better option for borrowing smaller amounts.