Can You Get An Unsecured Home Loan?

When you think of financing a home through loan, you know that it is going to be a traditional mortgage loan which is secured by your own property. An unsecured home loan is like a dream come true for many of us. However, this dream has still not turned into a reality in India.

What is an unsecured loan?

As the name suggests, an unsecured loan is one that is not secured by any collateral. In case of home loan, the property itself acts as a collateral. It is a cushion for the lending institution as the last resort in case if you fail to make the home loan repayment. Hence, home loan cannot be an unsecured loan. Other form of borrowings like personal loans, credit cards etc., come in the category of unsecured loans.

Usually, unsecured loans have slightly higher rate of interest and shorter tenure, thus making your EMIs bigger. This is because the banks want to make up for the risk taken by them.

Can I get an unsecured home loan in India?

No. This facility is not offered by any of the banks or financial institutions in India. Even in foreign countries like the USA, unsecured home loan is a rather smaller market. One needs to have an extraordinary credit score and credit history so that the lender can be sure that the borrower is capable of making timely payments. Even those with credit in the above-average category may not be eligible, depending on the lender and the terms of the loan.

In some cases, when people fall short of money even after taking home loan, they resort to personal loans which are unsecured. However, this is not advisable as you might be trapped in a number of EMI payments, with the interest rate on personal loans being high.

What are unsecured home improvement loans?

Home Improvement Loan is taken for the complete renovation of the house. It can be a home equity loan as well as an unsecured loan. The facility of unsecured home improvement loan is quite recent in the foreign markets. For this, home collateral is not necessary, but a good credit score is must. Loan tenure is shorter and the rate is higher.

Bottomline, you cannot get a home loan without keeping your property as collateral with the lender, as of now. Personal loans are the easiest forms of unsecured loans. If you do not have an asset to keep as collateral, you can take a personal loan and utilize it in your home needs. However, experts say that you should rather use your savings, than taking a personal loan as it may put a lot of installment burden.

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