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Possible Risks of Unsecured Loans

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Financial Problems are always a challenge in life, that can arrive at your doorstep at any moment, making you struggle for finances. It is possible that you have your investments tied up when you encounter problems like home renovations, sudden travel plans, or medical emergencies. To solve such financial problems, Banks provide Personal Loans that require no collateral or security. Moreover, you can easily apply for personal loan online through their online portal. However, it is important to understand that unsecured loans also possess a certain amount of risk. Read on to know more about the possible risks associated with unsecured loans:


High Interest Rate

While Banks can provide some type of loans without registering your assets as collateral. However, in the absence of a collateral, banks charge higher interest rate. Generally, interest rates in personal loans are higher than other loan options like home loans or car loans. Accordingly, it is also advisable to check the interest rates provided by different lenders before availing a personal loan for your financial needs.

Borrowing Debt to Pay Debt

Personal Loans are helpful in solving all kinds of financial problems. Sometimes, people use Personal Loans to cover other kinds of debt like home loan instalments and credit card debts. If that is the case, then it is crucial to realize that borrowing loans to clear other debt can land you in a dire state with an even larger burden. It is advisable to consider all the available options before going forward with this option.

Credit Score

While personal loans can be easily availed, one should also have an idea about all possibilities. In case you are not able to complete your loan payments, your credit score can drastically reduce. Regardless of the lender that you choose, inability to repay the loan will adversely affect your credit score, making it difficult to avail another loan in future.

Terms & Conditions

“Unsecured” loans do not imply that you can avoid repaying the loan in any circumstances. Before availing a personal loan or any other unsecured loans from a bank, you should definitely read the terms and conditions. It is important to do so because there might be additional fees, charges, and conditions related to interest rate changes that might be mentioned in the official documents of the loan application.

After evaluating the possible risks of unsecured loans, you can confidently avail them in case of any financial problems.


You can also visit YES BANK's website to know more about their Savings Account, NRI Savings Account and Fixed Deposit Accounts.

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