What is a personal loan?
What is unsecured loan? An unsecured loan is a form of borrowing money from a bank or financial institution without the need for collateral. This loan is based on the borrower's personal reputation, income, and ability to repay.
What is the concept of unsecured loan?
Characteristics of unsecured loans
- No collateral required: Unlike mortgage loans, borrowers do not have to pledge their home, car or other valuable assets.
- Fast approval time: Simple procedures, quick disbursement, usually within a few working days.
- Diverse loan limits: Depending on income and credit profile, loan limits can range from several million to hundreds of millions of VND.
- Higher interest rates than mortgage loans: Because there is no collateral, unsecured loan interest rates are usually higher than mortgage loans.
- Based on credit score: The bank will review credit history to assess the customer's ability to repay.
What is credit?
Credit is a financial commitment that an individual or business makes when borrowing capital without mortgaging assets. Credit institutions rely on the customer's credit history, income and ability to repay to decide the loan limit as well as the applicable interest rate.
What is the concept of credit?
What is unsecured loan?
Unsecured lending is a form of credit where a bank or financial institution provides a loan to an individual or business without requiring collateral. Instead of relying on collateral, this loan is approved based on the borrower's personal reputation, monthly income, and credit history.
How unsecured lending works
- Based on personal reputation: Borrowers do not need to mortgage assets but must have a good credit history and stable income to qualify for a loan.
- Quick application review: The bank or financial institution will check financial information, employment contracts, salary statements, or related documents before approving the loan.
- Higher interest rates than mortgages: Since there is no collateral, the risk to the lender is higher, resulting in interest rates that are often higher than mortgages.
- Flexible loan limit: Loan amounts can range from several million to hundreds of millions of VND, depending on the borrower's financial capacity and credit profile.
- Versatile Uses: The loan can be used for a variety of purposes such as personal expenses, tuition payments, travel, shopping, or small business investment.
What are mortgages and unsecured loans?
Here are the differences between mortgage loans and unsecured loans:
Comparison table of two forms of mortgage and unsecured loan
Unsecured loans
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- No collateral required.
- Low loan limit (usually from 10 - 500 million).
- Short loan term (from 6 months – 5 years).
- Higher interest rates than mortgages.
- Fast disbursement time (a few days).
Mortgage Loan
- Need collateral (real estate, car, savings book).
- High loan limit (can be up to billions of dong).
- Longer loan terms (5 – 25 years).
- Lower interest rates than unsecured loans.
- Disbursement time is longer due to asset appraisal.
What is unsecured loan?
An unsecured loan is a form of loan that does not require collateral, based on the borrower's personal reputation, income and ability to repay. The bank or financial institution approves the loan based on the borrower's credit history, employment contract and monthly income.
This loan usually has a higher interest rate than a mortgage because of the greater risk to the lender. The borrower can use this money for a variety of purposes such as shopping, travel, education, home repairs or a small business.
Conditions for unsecured loans
To be approved for a personal loan, borrowers must meet the following conditions:
Age:
- From 18 - 60 years old (depending on the regulations of each bank/financial institution).
- Some units may require a minimum age of 20 – 22 years.
Stable income:
- Borrowers need to have a stable job with a minimum salary (usually from 3 - 5 million VND/month).
- Proof of income: Salary statement, labor contract, social insurance.
Good credit history:
- No bad debt at the time of loan.
- If you have borrowed before, have a history of timely repayment.
Have valid identification:
- Valid ID card/CCCD/Passport.
- Household registration book or temporary residence certificate at the place of loan registration.
Bank account (if required):
- Some financial institutions disburse funds through bank accounts instead of cash.
Depending on each bank or financial company, loan conditions may vary and be flexible according to customer types.
Popular forms of unsecured loans
Currently, financial institutions offer many forms of unsecured loans suitable for each customer segment, including:
Salary based loan
This is the most popular form of loan, for people with stable income from monthly salary.
- Target audience: Office workers, workers, teachers, doctors, engineers, or anyone with a labor contract and receiving salary through bank or cash.
Loan on utility bill
Applicable to customers with a history of paying electricity, water, internet, and cable TV bills on time.
- Subject: Individuals with electricity and water bills in their name, regularly paying on time.
Loans based on life insurance
For customers who have a life insurance contract and have paid premiums for a certain period of time.
- Subject: People who have participated in life insurance for 1 year or more.
Loan on credit card statement
Applicable to customers with credit cards and regular spending history.
- Subject: People with credit card for 6 months or more.
Loan on credit according to old credit contract
For customers who have borrowed from banks or finance companies and have a good repayment history.
- Subject: People who have had a previous unsecured loan at a bank or financial institution.
Loan on motorbike/car registration
For customers who own a motorbike or car and want a quick loan.
- Subject: People who have motorbikes or cars in their name.
Loan based on online business revenue
For those who do business on e-commerce platforms or social networks such as Shopee, Lazada, TikTok Shop, Facebook.
- Target: Online shop owners with stable revenue.
Advantages and disadvantages of unsecured loans
Advantage:
- No collateral required, suitable for many customers.
- Simple procedure, quick approval time.
- Fast disbursement, usually takes only 24 - 48 hours.
- Meet personal financial needs such as shopping, traveling, studying, small investments.
Disadvantages:
- Interest rates are higher than mortgages, because there is no collateral.
- Low loan limit, usually from 10 - 500 million VND.
- A stable income is required, as the ability to repay debt is an important factor in loan approval.
Unsecured loans is a flexible financial solution for those who need quick capital without mortgaging assets. LiveTrade Pro has provided an overview of this form of loan, helping you better understand the benefits and necessary conditions. However, before deciding to borrow, you need to carefully consider your financial capacity, interest rates, as well as a reasonable repayment plan to avoid unwanted financial risks.
