Loans are sums of money lent to borrowers, which are to be paid back within a stipulated time period with an interest fee to be paid to the lender which is how he sustains his lending business. However, how can lenders be assured that his money will be returned? That reason is what birthed the concept of secured loans - where the borrower’s assets are provided as collateral for the loan. In the event that the borrower is unable to repay the secured loan and depending on the terms of the loan, the lender will take ownership of the borrower’s assets therefore reducing or negating his loss.
However, the biggest drawback of secured loans is that it completely fails to serve those who have minimal assets or come from non-affluent backgrounds. That’s where unsecured loans come in.
Financial institutions like OnCredit give out unsecured personal loans to those who urgently need to borrow money but do not have substantial assets to show as collateral. Unsecured loans usually just require the borrower to be of legal age (above 18 years old), have a source of regular income and a photo of themselves and their National Identity Card. The regular source of income can be considered the guarantee to the lending party that the borrower has the means to repay the unsecured personal loan.
Unsecured personal loans online also tend to be very quick which means that the borrower can get the money to his hand in a matter of hours, whereas had they tried to apply for a loan from a bank, they would need to obtain letters from their employers, collect the last 3 months’ salary slips and wait for days or even weeks to receive the money.
Due to the absence of collateral when it comes to unsecured personal loans, the interest rates, borrowing period and amount of the loan is impacted. Even the best unsecured personal loans in Sri Lanka (like what we offer at OnCredit) have higher interest rates and service fees to cover any possible situations where borrowers default on their unsecured loans. The only collateral you bring when you apply for unsecured loans online (apart from your regular source of income) is your character, social standing, employment and references. If you have managed to lead an exemplary life, you may find that you are eligible for the best unsecured loans that rival even personal loans from a bank. If you have a history of bad credit, you might not be eligible for the best unsecured loans.
Unsecured personal loans are quite often a blessing for people who need quick cash but do not have sufficient assets to submit as collateral. The only risk you will be undertaking is the impact on your credit score in case you are unable to make your payments on time. Whatever option you choose, secured loans or unsecured loans online, ensure that you choose wisely about what works best for you.
Contact OnCredit to find out more about the best unsecured loans in Sri Lanka.