Collateral Free Loans
A ‘collateral’ is an asset or a valuable item one has to guarantee against taking a loan. On repaying the loan, the collateral can be repossessed and if one fails to repay the borrowed loan, the collateral is retained by the lender.

A collateral free loan is a loan provided to the borrower without any guarantee. In simple terms, this means, you can approach a lender and borrow money from him at a certain rate of interest even if you have nothing to pledge or invest.

Who Needs a Collateral Free Loan?

Big business and industries need lots of capitals which run into tens, or hundreds, or thousands of crores, and hence they do not qualify a collateral free loan.

Collateral free loans are mostly required by employees and owners or entrepreneurs of MSME (micro, small and medium enterprises).

MSMEs are hugely preferred by small-town folks and it would be interesting to note that at present, there are more than 600 crore MSMEs operational in India. The contribution of MSMEs to the growth of Indian economy is significant.

A Few Examples:

  1. Personal loans for employees
  2. Capitals for small and medium businesses or loans for
  3. Part payment when you buy home loans, car loans or other personal loans
  4. Out of pocket medical expenses that exceed the insurance amount
  5. Education fees for children
  6. Loans for home or business renovations
  7. Refinance loans
  8. Any sudden unexpected expenses that are not budgeted for at the start of the year.

Public Collateral Free Loan Schemes:


The government of India has tied up with SIDBI (Small industries development bank f India) and created the CGTMSE or the Credit Guarantee Trust for Micro and small enterprises. It came into being on 30 August, 2000.

Individuals can avail loans up to INR 1 crore under the CGTMSE and the borrowers are required to have a registered business and are expected to submit a concrete and feasible business plan at the time of applying for the loan. Repayment schedules are flexible that expend up to 5 years.

The loan is disbursed through MLIs (Member lending institutions), which can be any scheduled commercial bank (PSUs, foreign or private banks) and selected state rural banks and finance corporations.

The interest rate is charged by the MLIs as per the existing RBI guidelines, which should not exceed the PLR (Prime lending rates) by more than 3%. For example, if the PLR of SBI is 10%, the interest it can charge on a CGTMSE collateral free loan cannot be more than 13% (10% + 3%).

MUDRA Yojana

Started under the Jan Dhan Yojana on 8 April, 2015, MUDRA or Micro Units Development and Refinance Agency is more of an MFI (Micro finance institution), where the maximum amount that can be borrowed is INR 10 lakhs.

3 types of loans are disbursed under the MUDRA yojana.






Up to 50,000 INR

12% p.a

5 years


50,000 – 5 lakhs

Discretion of the MLI

Discretion of the MLI


5 lakhs – 10 lakhs

Discretion of the MLI

Discretion of the MLI

Various Public and private sector banks, regional rural banks, MFIs, NBFCs and co-operative banks function as MLIs (member lending institutions) to the borrowers under the Pradhan Mantri MUDRA Yojana (PMMY).

Does Lendingkart Offer An Advantage?

The major advantages you can enjoy when borrowing from Lending kart are

  1. Minimal processing time and requirements
  2. Swift approvals – You can have your loan approved and money transferred to your account within 72 hours (or 3 days)
  3. Hassle free processing – A loan can be applied and approved online 100% without you ever having to visit our office physically or wait in queues.
  4. Convenient loan tenures
  5. Competitive interest rates
  6. Analyze your business and offer you the best possible solutions
  7. Flexible repayment schedules
  8. No penalty for early repayment. Once you have paid off your first EMI, any loan can be pre-closed without any additional penalty.
  9. No hidden costs
  10. Benefits for Women loans
  11. Loans available up to INR 2 crores.

Types and specifications of loans available from Lending kart (All values in INR)







50000 – 2 Crores

50000 – 2 Crores

50000 – 1 Crore

50000 – 2 Crores


15-27% *

15-27% *

15-27% *

15-27% *







1-24 months

1-36 months

1-12 months

1-12 months


Bi-weekly/ Monthly

Bi-weekly/ Monthly

Bi-weekly/ Monthly

Bi-weekly/ Monthly


>90,000 INR turn over in 3 months


72 hours

72 hours

72 hours

72 hours

*Interest rates may vary depending on the type of business, annual turnover and the revenues.

Collateral Free Loans FAQs:

1. What is an NBFC?

A non-financial banking company is an organization which primarily lends money and also offers facilities such as stock trading, investment advice, portfolio management etc. NBFCs are registered under the Companies Act of India, 1956 or 2013 and regulated by the Reserve Bank of India under the RBI Act of 1934. Examples include Muthoot finance, Bajaj finance, Lendingkart, etc.

2. What is the difference between an NBFC and a Bank?

The major difference between a bank and an NBFC is that, an NBFC cannot issue self-drawn cheques, demand drafts or accept savings deposits.

3. Is NBFC same as an MFI (Micro Finance Institution)?

They are not the same, even though both offer collateral-free loans. As the name suggests, a microfinance institution operates a micro level compared to NBFCs. MFIs are mostly operation in small villages and cater to the poorer sections of the people. While NBFCs mostly serve borrowers who require amounts upwards of 50,000 rupees, MFIs mostly cater to requirements of less than 20,000.

4. What are the documents I require to avail a collateral free loan?

KYC info, Proof of business registration, Bank statement (of last 12 months), PAN card details, GST and IT filing returns. Know More Business Loan Eligibility & Requirements

5. How will I repay?

Repayment can be in flexible bi-weekly/ monthly installments. Our loans are spread across a convenient tenure of 1-3 years depending on your requirement. You can use the NACH (National automatic clearing house) service or other approved modes for repayment.

6. Are the interest rates flexible?

Yes, the interest rates may vary depending upon the health and prospects of your business, your past business history, annual turnover and the revenues and may float between 15-27% annually.

7. Can I get the whole amount I apply for?

Depends upon your credit score and the potential to generate sales/ revenues. A good credit score and a business with financial stability will ensure quick and maximum approval amounts.

8. What happens if I default?

If you default or fail to repay the loan within the stipulated time, your credit scores will go down, the borrower can sue you, take legal action on you, and blacklist your bank accounts. It will become very difficult to be a borrower again. Know More - What Happens When You Default on a Loan?

9. Can I renew my loan after full repayment?

Yes, your loan can be renewed for the same sanctioned amount after you have paid the one-time processing fee of 2 to 3% (on the principal amount).

Business Loan Apply Online

Collateral Free Loan News

A New Growth In the Collateral Free Loans

Within the financial year of 2021-2022, the collateral free financial assistance has witnessed a significant growth. This is one of the things that showcase the requirement for a loan of such kind that has already increased. It has been noted that such an increase is only due to the post covid era as well as the need for the revival of many businesses. 

It is the efforts of the officials to keep up with such requirements and to get the loans to as many people in need as possible. The loans are more for the beneficiaries who are engaged in the MSEs.

News Updated Date: 26th July 2022