What Do You Know About Unsecured Loans?

Introducing a revolutionary financial solution - unsecured loans: an answer to your personal financial woes. Unsecured loans, or 'vay tín chấp' as it's known in Vietnam, is a unique lending option that doesn't require any collateral. That's right, no need to put your assets on the line! This innovative loan type is a game-changer for those seeking financial assistance without the risk of losing their valued possessions. So, what is this mysterious 'vay thế tín chấp' and how does it work? Join us as we unravel the mysteries of this intriguing financial solution and discover a whole new world of borrowing possibilities.

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While mortgage loans are familiar to many, few understand unsecured loans. Let’s explore and make the most of this form of unsecured loan through the article below.

1What is an Unsecured Loan?

Unsecured loans do not require collateral

An unsecured loan is a form of bank loan that does not require collateral and instead relies on the borrower’s personal reputation and repayment ability.

This type of loan caters to personal needs or consumer purchases, offering convenient and flexible options with tenures ranging from 12 to 60 months and loan amounts typically between 10 million and 500 million VND.

Unsecured loans offer flexibility to meet personal needs

Borrowers can apply for an unsecured loan based on their salary, life insurance, utility bills, business licenses, or even installment credit contracts, as long as they can make regular payments of principal and interest and are eligible for cash withdrawals.

2Proper Classification of Unsecured Loan Groups

There are two main groups of unsecured loans

Unsecured loans can be classified into two groups, each with distinct features and target borrowers.

Unsecured Personal Loans: These are loans for personal purposes such as medical expenses, consumer purchases, home purchases, weddings, or travel.

Unsecured Business Loans: This type of loan supports businesses in need of capital for operations, investments, or infrastructure development.

3Classification of Unsecured Loans by Product

Cash Loans for Consumption

This type of loan is intended for personal consumption, with the funds either transferred to the borrower’s account or received in cash at a transaction office after signing the loan agreement.

Installment Purchase Loans

Borrowers only need to pay 10% to 15% of the item’s value upfront

Borrowers only need to pay 10% to 15% of the item’s value upfront, with the bank covering the remaining cost. However, borrowers must repay the loan with interest within the agreed timeframe as stipulated in the contract.

Overdraft Loans

This type of loan is offered exclusively by banks, allowing customers to withdraw funds beyond their current account balance. The bank calculates interest based on the overdrawn amount.

Home Improvement Loans

These are cash loan packages designed for customers who wish to renovate, redecorate, or purchase new appliances for their homes.

Business Operation Loans – SME

This loan type provides working capital for small and medium-sized enterprises, supporting their production and business activities.

4Unsecured Loan Application Process

Registration Documents

The required documents for unsecured loan applications vary depending on the loan group and product.

Legal Documents

  • Copy of ID card/passport/identity card.
  • Copy of household registration book/temporary residence book/temporary residence certificate.
  • Copy of marriage certificate or certificate of single status.
  • Income verification documents.
  • Employment contract: Salary slips for the last 3 months/salary statements.
  • Depending on the loan product, additional documents may be required, such as insurance policies, utility bills, vehicle registration certificates, business licenses, or financial records.

Unsecured Loan Procedure

Step 1: Application Acceptance

The bank or financial company will receive the unsecured loan application and evaluate it. If the application meets the requirements, they will offer suitable loan packages and provide the necessary application forms and documents.

Step 2: Information Verification

Upon receiving the complete set of documents, the staff will review and verify the accuracy of the information provided.

The loan process includes application acceptance, information verification, checking, approval, and disbursement.

Step 3: Checking and Disbursement

At this stage, after verifying the accuracy of the information, the staff will submit the application to the Director for approval, which typically takes 1 to 3 days, depending on the bank or financial institution.

Step 4: Contract Signing and Disbursement

Once the bank approves the loan, the borrower is invited to sign the contract. Carefully read all the terms and conditions.

Step 5: Debt Collection and New Credit Decision

The borrower will make debt payments by deducting a portion from their salary to the lending institution.

5Unsecured Loan Requirements

Banks and financial companies may have specific requirements for unsecured loans, which can include:

  • Age between 22 and 60 years old.
  • No bad debts with any credit institution.

Borrowers must be at least 22 years old for unsecured loans.

  • Possess a household registration book/temporary residence book/temporary residence certificate in the same area as the lending institution’s operations.
  • Valid ID card/identity card.
  • Stable income demonstrating the ability to repay the loan to the bank/financial company.
  • For bank loans, borrowers must have a salary income and at least 12 months of service at their current workplace.

6How is an Unsecured Loan Different from a Secured Loan?

Both unsecured and secured loans are forms of bank loans, but there are some key differences between the two:

Secured loans require collateral, while unsecured loans do not.

First, unsecured loans do not require collateral such as real estate or land, unlike secured loans where collateral is mandatory.

Second, secured loans tend to have more stringent requirements, especially regarding collateral, making them more complicated and cumbersome.

Finally, the duration and limits of the two loan types differ. Secured loans have a longer tenure of up to 35 years and a higher loan limit of up to 80% of the collateral’s value. In contrast, unsecured loans have shorter tenures of 1 to 5 years and a maximum loan amount of 500 million VND.

7Choosing the Right Bank for an Unsecured Loan

What criteria should you consider when selecting a bank for an unsecured loan?

When considering an unsecured loan, it’s essential to choose a financial institution that offers quick, transparent, and reliable solutions to your financial needs. Here are some criteria to consider when selecting a bank for an unsecured loan:

  • Look for a bank with competitive interest rates and compare loan packages across different banks.
  • Examine the additional fees charged by different banks to find the most cost-effective option.
  • Choose a bank that offers flexible repayment options to accommodate your financial situation.
  • Opt for a bank with simple and straightforward application processes, avoiding complicated and time-consuming procedures.
  • Compare the early repayment fees charged by different banks, as these can vary significantly.
  • Consider the loan approval time, as some banks may have slower processes, resulting in delays in your loan approval.

The information provided above covers the procedures, concepts, and methods related to unsecured loans. Hopefully, this will give you a better understanding of unsecured loans and help you decide if this is a suitable option for your financial needs.

Frequently asked questions

Unsecured loans are a type of loan that does not require any collateral. This means that the borrower does not need to put up any assets as security for the loan. Unsecured loans are typically offered at higher interest rates than secured loans, and the amount that can be borrowed is usually smaller.

There are several benefits to unsecured loans. Firstly, they are more accessible to borrowers who may not have any assets to offer as collateral. Secondly, the application process is usually faster and more straightforward than for secured loans. Additionally, unsecured loans can be used for a variety of purposes, such as debt consolidation, home improvements, or starting a business.

The main risk associated with unsecured loans is the potential for higher interest rates and fees. Borrowers may also face penalties and damage to their credit score if they fail to make payments on time. It is important to carefully consider the terms and conditions of an unsecured loan before taking one out to ensure that you can afford the repayments.

To qualify for an unsecured loan, lenders will typically look at your credit history, income, and employment status. A good credit score and stable income are usually required to be eligible for an unsecured loan. However, each lender will have their own specific criteria, so it is worth shopping around and comparing different options before applying.

Unsecured loans are offered by a variety of lenders, including banks, credit unions, and online lenders. It is important to research different lenders and compare interest rates, fees, and terms before choosing a loan that is right for you.