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Unsecured lending refers to loans provided without requiring collateral or security from the borrower. Here's an overview:

Key Points:

  • No Collateral: Unsecured loans are not backed by assets like property or vehicles. Borrowers are approved based on creditworthiness and repayment capacity.
  • Types of Unsecured Loans: Personal loans, credit cards, student loans, and certain types of business loans are common examples.
  • Interest Rates:Typically higher compared to secured loans due to the increased risk for lenders.
  • Credit Check: Lenders assess credit scores and histories to determine eligibility and loan terms. Higher credit scores often result in better loan terms.
  • Loan Amount: Generally smaller compared to secured loans, as lenders rely solely on the borrower's creditworthiness.
  • Purpose:Unsecured loans can be used for various purposes such as debt consolidation, personal expenses, education, or business needs.

Term loans are a type of borrowing arrangement where a specific amount of funds is borrowed from a financial institution or lender for a fixed period, typically at a fixed or variable interest rate. Here's an overview:

Key Features:

  • Loan Amount:Borrowers receive a lump sum amount based on their creditworthiness, business plan, or personal needs.
  • Fixed Repayment Period:Loans have a predetermined repayment schedule, usually ranging from a few months to several years.
  • Interest Rates:Term loans can have fixed rates (unchanging throughout the loan term) or variable rates (fluctuating with market conditions).
  • Collateral Requirements:Depending on the type (secured or unsecured), some term loans may require collateral like property, vehicles, or business assets.
  • Purpose:They can be used for various purposes, such as business expansion, purchasing equipment, home renovation, or other personal needs.

An Overdraft (OD) Against Property is a form of secured loan offered by banks or financial institutions where a borrower can access funds by using their property as collateral. Here's an overview:

Key Features:

  • Collateral:Borrowers pledge their property (residential or commercial) as security for the overdraft facility.
  • Credit Limit: Lenders assign a credit limit based on the property's value, allowing borrowers to withdraw funds as needed, up to the specified limit.
  • Interest Payment: Interest is charged only on the amount withdrawn, not on the entire credit limit.
  • Repayment Flexibility: Borrowers can repay and redraw funds as per their convenience, similar to a revolving line of credit.
  • Purpose: Funds can be used for various needs, including business expansion, debt consolidation, education expenses, or other personal uses.
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