A personal loan is a type of loan issued by a bank based on the borrower’s creditworthiness. It is also referred to as an unsecured loan because it does not require collateral or a guarantor.
Key features of a personal loan:
- No collateral required:
- Unlike other loan products that require assets or guarantees, personal loans allow applicants to borrow based solely on their credit profile.
- No guarantor needed:
- Borrowers do not need to involve a third party for guarantee purposes.
- Creditworthiness as the main criterion:
- The applicant’s credit history and financial stability serve as the basis for loan approval.
How do banks evaluate personal loan applications?
Banks typically review:
- Income stability: Ensuring the borrower has a steady source of income.
- Credit history: Assessing the borrower’s credit record to minimize the risk of bad debts.
By meeting these criteria, borrowers can access funds without pledging any collateral.