There are several types of loans currently available in market — be it home, education, personal, car or others. Loans however, are not free of cost.
A loan in simple term refers to a borrowed monetary amount that comes with an attached cost, called interest. This entire cost needs to be paid back on a monthly basis in form of Equated Monthly Instalment, generally known as EMIs. In short, you end up paying more to the loan provider than what you availed.
As the loan market is growing rapidly in India, several innovations in the loan market is providing ease to customers. Amid this is a debt instrument called ‘Instant Loan’ which as the name suggests is available to borrowers instantly.
Let's find out how these loans work and whether you should opt for it.
Five Points You Must Know:
Loan Approval Period:
Individuals with sudden, immediate and urgent needs should opt for Instant Loan facility from banks. Normally, if such unplanned needs are to be met within hours or a day, instant loans can really be helpful in case you don’t want to or are unable to borrow from your relatives or friends. However, if you have time, say 5-10 days, then regular personal loan can be opted for as they would cost you less.
Guarantor & Credit History:
Instant Loans don’t need a guarantor and very less documentation. Generally, Instant Loans are applied online and applicants are required to submit minimal documents online itself for verification. For regular loans, you may have to physically visit the lender’s branches or point of sales or have someone collect your documents during the approval process.
Credit history is important for instant loans as well as the lender has to have some basic assurance to trust your repayment capacity. However, it may not have the same parameters as a regular personal loan has. A minimum income level will be the basic requirement below which lenders are not likely to disburse these loans and your repayment capacity can be assessed by your Credit Score. In regular personal loans, a more detailed check is done with factors like employment history and living status (on rent or self-owned house) playing a crucial part.
Rate of Interest:
Rate of Interest for Instant Loans are on the higher side - ranging anywhere from 14 per cent to as high as 22 per cent. Since one is desperate for credit at such a time, lenders are ready to offer you the same within hours with least documentation. Such loans should thus be avoided for business borrowers who do not have any back up for repaying it.
Some lenders may waive off the processing fees compared to regular personal loans, but on the other hand, regular personal loans will have cheaper rates of interest.
Loan Amount :
Depending on your monthly income, existing debts and other financial liabilities, the lender decides upon how much loan you are eligible for. Generally the personal loan disbursal amount ranges from a minimum of `50,000 to `25 lakh for regular personal loans. For instant loans, the amount may be lower given the relatively high risk in sanctioning an unsecured loan with minimum documentation.
Tenure of Repayment :
To repay the availed Instant Loan, an individual is given a tenure between 1 and 12 months. In few cases, depending on the lender, borrowers are may also be allowed to pay the entire outstanding loan amount (including interest) in six months. In regular personal loans, the tenure has a wider range of but a minimum six months is required as tenure and a maximum of 60 months is permitted for repayment.
What Is An Instant Loan?
Instant Loan is basically a personal loan which is made available ‘instantly’. It is approved and disbursed either in a matter of few hours or within a day or two. The loan is approved much faster than a regular Personal Loan and quite apt for someone with immediate and urgent need for credit.
If sudden unexpected expenses arise before a marriage ceremony, urgent medical needs, large purchases or even a quick cash requirement for your business, this loan instrument can be opted for. You should however, be mentally prepared for a higher interest outgo than a traditional personal loan....