What is an unsecured loan? DConditions, procedures and benefits when borrowing

1. What is an unsecured loan?

An unsecured loan is a form of loan that does not require the borrower to provide collateral such as a house, vehicle or other valuable assets. Instead, banks or credit institutions will be relied upon credit reputation and the borrower's financial ability to make decisions about loan limits and related conditions. This is a popular financial solution, suitable for people who need capital quickly but do not want or cannot use assets as collateral.

Factors determining unsecured loans:

• Monthly income: The bank will consider the borrower's stable source of income to ensure the ability to repay on time. Some organizations require salary statements, labor contracts or documents proving income from business.
• Credit history: Credit history shows how well the borrower has paid off previous loans or credit cards and is assessed using the credit score scale of CIC - National Credit Information Center. A high credit score, indicating that the customer repays debt on time and has no bad debt, is considered good Quarter Customers can easily borrow capital with preferential interest rates. On the contrary, low scores due to late repayment or bad debt will be negatively evaluated, reducing loan opportunities and increasing interest rates.
• Ability to repay debt: The bank will rely on the customer's monthly income and living expenses to evaluate the ability to repay the loan. Banks often use a debt-to-income ratio (DTI) calculator. If DTI is low, meaning the customer's debt accounts for a small proportion of income, the debt repayment ability will be assessed as good. On the contrary, a high DTI shows that customers are carrying a lot of debt compared to their income, causing banks to assess their ability to repay debt as unsafe.

Based on factors such as income, credit history, and ability to repay debt, the bank or credit institution will evaluate the borrower's reputation. From there, they decide on the loan limit, interest rate, and accompanying conditions suitable for each specific case.

Unsecured loans are suitable for small and medium spending needs, with the ability to pay in a short time:

• Consumer shopping: Support costs for household products, electronics, furniture, clothing...
• Travel: Sponsor domestic or international travel.
• Wedding: Costs for wedding ceremonies, wedding parties and related services.
• Study: Tuition support, purchase of books and learning equipment.
• Health care: Payment of medical, surgical, and treatment costs.
• House repair: Renovate, upgrade or repair houses.
• Unexpected spending: Address urgent or unforeseen financial needs.

Subjects suitable for unsecured loans

• Officials and civil servants: People who work in state agencies, have stable income and are guaranteed by the budget.
• Employees of state units: Workers at state organizations or state-owned enterprises usually have a stable income and good welfare benefits.
• People with long-term labor contracts: Employees working at companies or organizations with official, long-term labor contracts, demonstrating job stability.
• People with stable income: Individuals with a clear, regular source of income, whether working in the private sector or self-employed.

Distinguish between unsecured loans and mortgage loans

Unsecured loans and mortgage loans are two popular forms of loans, meeting different financial needs. Although both are provided by banks or credit institutions, each form has its own characteristics and application conditions. Customers please refer to the table below to choose the option that suits your financial goals and repayment ability.

2. Advantages and disadvantages of unsecured loans

Unsecured loans are a flexible form of loan that does not require collateral, helping to quickly access capital for personal needs. However, unsecured loans have their own advantages and disadvantages. Below is a summary for customers to have an overview and make appropriate decisions.

Thus, unsecured loans are a good choice if customers need to borrow money quickly without collateral. This form is suitable for small spending needs such as shopping, travel or medical treatment, especially when customers have a stable income and good credit history. However, unsecured loans often have high interest rates and loan limits are not large, so only should Borrow when the customer has the ability to repay quickly. If you need to borrow a large amount of money or do not want to pay high interest rates, a mortgage loan will be a more reasonable choice.

3. Conditions for unsecured loans

To receive an unsecured loan from a bank or credit institution, customers need to meet the following conditions:

• Vietnamese citizens aged 18 years or older: The borrower must be a Vietnamese citizen with civil act capacity, 18 years of age or older, with temporary or permanent residence in the area where the bank or credit institution operates. This helps ensure convenience in transactions and communication.
• Stable income: Customers need to have an income of 5 million VND/month or more and can prove income through payroll or bank statements for the most recent 3-6 months. This helps the bank evaluate the customer's ability to repay the loan.
• Good credit history: Borrowers must not have bad debt at banks or other financial institutions. A good credit history increases the likelihood of loan approval and proves that customers have good financial management ability. CIC score from 600 points or more considered good, giving customers the opportunity to get approved for loans at preferential interest rates. If your credit score is below 300, customers will be in the bad debt group and will have difficulty getting a loan.
• Valid identification documents: Customers need to provide a valid identity card (ID card), citizen identification card (CCCD) or valid passport to verify identity and ensure the legality of the transaction.
• Ability to pay: Borrowers need to be able to repay the loan and ensure a stable income to fulfill their financial obligations on time. To prove, the borrower needs to provide a salary statement or labor contract, income certificate (if self-employed), bank account statement and proof of living expenses. These records help banks evaluate solvency and risk level when lending.

Note: Unsecured loan conditions may vary depending on each bank or credit institution. Therefore, customers should contact the lending unit directly to receive detailed advice and update the latest information.

4. Unsecured loan documents

Unsecured loan documents may vary depending on each bank, but in general, banks require the following basic documents for loan approval:

• Unsecured loan application: According to the bank's form, can be filled out directly at the bank or filled out online.
• Personal documents:
  • Copy of valid ID card/CCCD or passport.
  • Household registration book or temporary residence book (KT3) with notarized copy from the locality.
• Documents proving employment:
  • Labor contract is still valid, at least 3 months.
  • Appointment decision, transfer paper (if any).
• Documents proving income:
  • Payroll or salary transfer statement for the most recent 3 months.
  • Salary slip with confirmation from work unit.
  • Salary increase approval letter (if any).
• Additional documents (depending on the bank):
  • Documents confirming other income (if any).
  • Documents related to assets (if additional guarantee is required).

Depending on the requirements of each bank and each loan package, customers may need to prepare additional documents. Therefore, before applying for an unsecured loan, customers should contact the bank for details on necessary documents.

5. Unsecured loan registration process

The unsecured loan process at banks and financial companies usually includes 4 basic steps. Each step helps ensure transparency and accuracy in the loan approval process.

Step 1: Receive unsecured loan applications

• Customers prepare all necessary documents.
• The bank or financial institution will advise on an unsecured loan package suitable to the customer's needs and financial ability.

Step 2: Evaluate loan documents

• The bank will check the authenticity of the information in the file and evaluate the customer's ability to repay debt, including income and credit history., and other financial factors.

Step 3: Review loan applications

• The bank will consider relevant factors and make a loan approval decision based on a set of available standards, which may vary depending on each bank.
• Review time is usually 1 - 3 working days.

Step 4: Sign the contract and disburse funds

• KCustomers sign unsecured loan contracts.
• The loan will be disbursed to the customer's account within 1 - 3 days after signing the contract.

This process is designed to ensure that both the bank and the customer clearly understand the loan conditions, from interest rates, repayment terms to legal requirements. At the same time, the process also helps clarify the rights and obligations of both parties, creating transparency and trust throughout the loan process.

6. Interest rates, fees and interest calculation when borrowing unsecured loans

When taking out an unsecured loan, interest rates and fees are important factors that determine the total cost that customers must pay. Understanding how to calculate interest and related fees will help customers manage their finances effectively and avoid unwanted risks.

6.1. Interest rates and fees

6.1.1. Unsecured loan interest rate

• Interest rate: Unsecured loan interest rates usually range from 14% - 28%/year, depending on the bank, credit institution and loan package that the customer chooses.
• How to calculate interest rate: Interest rates can be calculated on a fixed principal balance or a decreasing balance, each method will have a different effect on the monthly payment amount.

6.1.2. Related fees

In addition to interest rates, customers need to pay attention to fees that may arise during the loan process:

• Loan application review fee:
  • Applicable only once when the loan is successfully approved.
  • The specific fee varies depending on each bank's policy, usually not too high.
• Early settlement fee:
  • If the customer wants to pay off the loan before the committed term, the bank will charge this fee to compensate for the lost interest.
  • Fees range from 3% - 5% on the remaining loan balance.
• Late payment interest:
  • If you do not pay on time, Customers will be charged interest and penalty rates. Penalty interest usually amounts to 150% announced interest rate, calculated on the outstanding principal balance. This can increase the financial burden significantly.

6.1.3. Important note

Late payments or failure to pay on time will negatively affect your credit history, causing... Customers encounter difficulties in future loan transactions. KCustomers should read the loan contract carefully to clearly understand the costs and commitments involved before signing.

6.2. How to calculate interest when borrowing unsecured loans

6.2.1. Method 1: Interest rate on principal balance

The interest rate is calculated based on the initial loan amount and does not change throughout the loan term.

Recipe:
Monthly payment amount = Fixed monthly principal amount + Fixed monthly interest

Suppose a customer borrows 100 million VND with a term of 12 months and an interest rate of 12%/year (equivalent to 1%/month). In this case, cBank loan interest rate calculation is as follows:

• Monthly principal payment = 100 million / 12 = 8,333,333 VND
• Fixed monthly interest = 100 million × 1% = 1 million VND
• Total monthly payment = 8,333,333 + 1 million = 9,333,333 VND

Result: customers will pay 9,333,333 VND per month for 12 months, with a total interest of 12 million VND.

6.2.2. Method 2: Interest rate on outstanding debt gradually decreases

In calculating interest rate on reducing balance, interest each period will be calculated based on the remaining principal amount after partial principal payment. This means that the amount of interest paid will gradually decrease over time, helping to reduce financial pressure on borrowers in later payment periods.

The specific calculation is as follows:

• Principal amount to be paid each period = Initial loan amount / number of repayment periods
• First period interest = Loan amount x Fixed monthly interest rate
• Interest in the following periods = Remaining principal x Fixed monthly interest rate
• Amount to be paid each period = Principal amount to be paid each period + Interest amount to be paid for the corresponding period

Suppose a customer borrows 100 million VND with a term of 12 months and an interest rate of 12%/year (equivalent to 1%/month). In this case, the bank loan interest rate calculation is as follows:

First payment period:

• Principal amount to be paid = 100 million / 12 = 8,333,333 VND
• First period interest = 100 million x 1% = 1 million VND
• Total amount payable in the first period = 8,333,333 + 1 million = 9,333,333 VND

Second payment period:

• Remaining principal amount = 100 million - 8,333,333 = 91,666,667 VND
• Second term interest = 91,666,667 x 1% = 916,667 VND
• Total amount payable in the second period = 8,333,333 + 916,667 = 9,250,000 VND

The payment amount per period will continue to decrease according to the above calculation until the loan is completed.

7. Be careful when taking out an unsecured loan at a bank

When deciding on an unsecured loan, customers should note the following points to ensure the loan process goes smoothly and avoid risks:

• Check credit history: Before applying for a loan, check your credit history and handle bad debts (if any) to increase your chances of being approved for a loan.
• Stable income assessment: Prepare complete documents proving income, such as salary slips or bank statements, to ensure your ability to repay debt is accepted by the bank.
• Financial balance: Only borrow an amount that matches your monthly repayment ability, avoid exceeding your financial capacity.

• Read the loan documents carefully: Carefully review the terms of the contract, including interest rates and penalty fees, and payment term to clearly understand your rights and obligations.
• Be careful with additional fees: Ask the bank clearly about related fees such as application processing fees, early settlement fees, or late payment fees to avoid unwanted costs.
• Remember the repayment time: Make sure to pay on time to avoid late fees and protect your customer's credit history.

Complying with the above notes will help customers borrow unsecured loans more safely and effectively.

8. SeABank - Unsecured loan bank with simple procedures and quick disbursement

SeABank is one of the reputable banks in Vietnam, providing unsecured loan packages with simple procedures and quick disbursement time. This bank offers many flexible unsecured loan options, helping customers easily access capital to serve their personal financial needs. Below is a summary of unsecured loan packages at SeABank.

Unsecured loans are a convenient and quick financial solution, helping customers meet their consumer needs without the need for collateral. With simple procedures, competitive interest rates and quick disbursement time, SeABank's unsecured loans are the ideal choice for those who need flexible capital. However, before borrowing, customers should carefully consider their financial capacity and carefully read the terms of the contract. 

If customers need support, please contact SeABank via Hotline 1900 555 587 or visit the website www.seabank.com.vn to get answers details.