Unsecured Loan Agreement in India

An unsecured loan agreement is a financial agreement between two parties, where a borrower receives a loan without providing any collateral or security. India has seen a rise in unsecured loans, primarily due to the ease of access and minimal documentation required for obtaining such loans. Here, we will discuss the key features of an unsecured loan agreement in India.

Eligibility Criteria

To be eligible for an unsecured loan agreement in India, one needs to fulfill the following criteria:

• Age: The borrower must be at least 21 years old.

• Employment Status: The borrower must be employed either in a salaried job or as a self-employed individual.

• Credit Score: A good credit score increases the chances of loan approval. A credit score of 750 or above is considered good.

Loan Amount and Tenure

The loan amount and tenure vary based on the lender`s policy and the borrower`s eligibility. Unsecured loans in India typically range from INR 50,000 to INR 50 lakhs and have a repayment tenure of 12 to 60 months.

Interest Rates and Fees

Unsecured loans have higher interest rates compared to secured loans as there is no collateral provided by the borrower. The interest rates vary from lender to lender and depend on the borrower`s credit score and other factors. Additionally, lenders may charge processing fees, prepayment charges, and other fees that need to be considered before applying for a loan.

Repayment Terms

The repayment terms of an unsecured loan agreement require the borrower to repay the loan in equated monthly installments (EMIs) until the loan is fully paid off. The EMI amount includes the principal amount and the interest charged on the loan. Borrowers can choose to prepay the loan before the tenure ends by paying a prepayment penalty.

Default and Consequences

In case of default, the lender may take legal action against the borrower. The consequences of defaulting on an unsecured loan agreement could be a reduced credit score, legal action, and difficulty in obtaining loans in the future.


Before entering into an unsecured loan agreement in India, borrowers need to thoroughly understand the terms and conditions, eligibility criteria, and repayment terms. Additionally, it is essential to compare the interest rates and fees charged by different lenders to choose the most cost-effective loan option. With proper research and planning, an unsecured loan agreement can be a reliable source of financing in times of need.