In today’s fast-paced world and the need for experiencing instant gratification, instant loans have become a popular choice for individuals looking to meet their financial needs towards experiencing and fulfilling life aspirations and adventures. These life events can encompass undertaking a long world tour or vacations, wanting to hold a dream destination wedding or a family event celebrating the milestones of their loved ones. Other untimely expenses such as home renovation and improvement require funds to initiate civil repairs to mitigate any further damage of one’s abode.
On the other hand, need for quick finance may arise to attend to any unexpected high-costs medical treatments, debt consolidation of multiple credit outstanding into a single equated monthly instalment (EMI) to streamline the outgoing EMI expenses.
But before you are drawn towards the quick availability of finances available to you with a click of a button, it is important to understand the nuances of personal loan. Know how these instant loans work, and what are the aspects to keep in mind before applying for a loan.
What are Instant Personal Loans?
An instant loan offering is nothing but a Personal Loan that is extended by lenders to borrowers. A personal loan is an unsecured loan that people can take to meet their personal needs. Personal loans, unlike secured loans, do not require any security/ collateral. The lender determines the loan amount, interest rate, and repayment period based on the borrower’s credit score, income, and other factors.
Personal instant loans are popular among individuals for a variety of reasons. One of the most common reasons is the agility in the process of applying for such a loan digitally and the instant online disbursements of the loan amount.
Other reasons include debt consolidation, which involves combining multiple debts into a single loan to simplify repayment. Individuals who want to build or improve their credit score can also benefit from personal loans. Personal loans, with their flexible repayment tenure and competitive interest rates, are a versatile financial solution for many.
Some of the most common reasons for taking an instant personal loan are as follows:
Renovate a house: These can also be taken for home renovation or repairs. Individuals can complete home improvement projects by taking out a personal loan instead of using their savings or using their credit card, which often has higher interest rates attached to it.
Medical emergencies: Sometimes, medical costs can be a significant financial burden on individuals, particularly when insurance coverage is limited. Specialised medical treatments can even wipe off your entire savings. In this case, an instant loan product like a personal loan can help you pay for medical bills, procedures, or treatments without having to break your Fixed Deposit (FD)s savings or any mutual fund investments.
Dream wedding or vacation plans: Personal loans can also be used for special life events like hosting your dream wedding or a once-in-a-lifetime vacation. While these expenses may not be deemed necessary, a personal loan can assist individuals in achieving their desired experiences without sacrificing other financial obligations.
How to Choose the Right Lender for your Instant Personal Loan?
When it comes to opting a personal loan, choosing a credible lender is equally crucial. However, with so many lenders out there in the market, it can be challenging to determine which one is right for you.
Here are some key factors when considering taking an instant personal loan
- Interest rates and fees: The interest rate is the amount you will pay on top of the principal borrowed. It is essential to compare interest rates from different lenders to get the best deal. Additionally, look at the fees that lenders charge, such as processing fees, prepayment penalties or any hidden charge.
- Loan terms: Personal loans typically come with fixed interest rates and terms that range from 12 to 60 months. Longer loan terms may result in lower monthly payments, but you will end up paying more interest over the life of the loan. Shorter loan terms may result in higher monthly payments, but you will pay less in interest.
- Customer service: It is important to choose a lender that has excellent customer service. Look for a lender that is responsive and willing to answer any questions you may have. Additionally, consider reading reviews from other customers to see their experiences with the lender.
- Credibility: Do your research on the lender to ensure they have a good credibility and a robust financial record. Look for a lender that is reputable and has been in business for a significant amount of time.
Choosing the right lender when opting for an instant personal loan requires careful consideration of several factors. By considering the aforementioned factors, you can find the lender that best meets your needs. Remember to read the fine print and ask questions before signing any loan agreement to ensure you understand the terms and conditions.
What is an Ideal Type of Personal Loan?
An instant personal loan can come in handy when you need to cover expenses that you cannot pay off with your current income or savings. However, with so many options available in the market, it can be daunting to determine the ideal type of personal loan that fits your financial situation. Here are some pointers to consider when looking for an ideal type of personal loan:
- Interest Rates: Look for a personal loan with a competitive interest rate. It helps you save money by paying lower EMIs.
- Flexible Repayment Tenure: An ideal personal loan should offer a flexible repayment period. Today a preferred loan would offer a repayment period of up to 60 months.
- Processing fees and foreclosure charges: An optimal instant personal loan would have a transparent process with no hidden charges. Before opting an instant personal loan, ensure that you are aware of all the associated fees and foreclosure charges, as they can increase the total cost of borrowing.
- Streamlined online process: A truly digital loan process is hassle-free and less time-consuming. Hence, consumers should go for a loan with minimal documentation and quick approvals.
- Seamless sanctioning and disbursal: The last thing anyone needs is unnecessary roadblocks in the application journey. Hence, the sanction and disbursement process should be quick, transparent, and effective.
By considering these factors, you can find the ideal type of instant personal loan that fits your financial situation and helps you achieve your financial goals.
Why is Credit Score Important?
Your credit score is a crucial factor that lenders consider when deciding whether to lend you money and at what interest rate. A credit score is a three-digit number that is calculated based on your credit history, payment behaviour, and other financial factors.
Your credit score reflects your creditworthiness, and it plays a crucial role in determining the cost of borrowing. If you have a good credit score, you are more likely to qualify for a loan with a lower interest rate, which means that you will pay less interest over the loan tenure. If you have a low credit score, you may not be able to obtain a loan at all, or you may be required to pay a higher interest rate, which can significantly increase the cost of borrowing.
To maintain a healthy credit score, pay your bills on time, keep your credit card balances low, and avoid opening too many new accounts. You can save money on interest and make borrowing more affordable by maintaining a good credit score.
How to Apply Online for an Instant Personal Loan with minimal documentation?
To begin the application process, visit the lender’s website and click on the ‘Apply Now’ button provided by the lender. The lender will typically ask for basic background information, such as your name and address (permanent and temporary) and will require you to upload identity documents such as your Aadhaar Card and PAN Card to verify your identity and address. The lender may also ask for your mobile number to verify your authenticity and to prevent any identity fraud.
After successful authentication, you will be asked to provide additional information related to your employment, as well as your desired loan amount and repayment tenure. The lender may also ask for a one-time approval to sign-up for the “eNACH” mandate towards authorising and initiating the auto-debit facility from the borrower’s bank account.
Once you have submitted all the required information, the lender’s digital platform will process your application and provide you with an acknowledgment through SMS or email. The lender will then evaluate your application and notify you of its status within a set timeframe.
If your application is approved, the lender will share the sanction letter stating the loan amount and the interest rate that will be charged and other terms of the loan facility. After reviewing and agreeing to the loan terms, you will be asked to provide your acceptance through an e-signature or OTP confirmation. Once you have completed all necessary formalities, the sanctioned loan amount will be digitally disbursed into your bank account.
To conclude, it is advisable to understand what an instant personal loan is and how it works before applying for one. In doing so, you can make informed decisions and ensure a smooth and hassle-free application process.
Remember to choose a reputable lender and collect all the necessary documents required for processing the loan. With careful planning and consideration, an instant personal loan can be a useful tool to meet your financial needs without providing any collateral/ security.
An instant loan is a short-term loan that's typically for a small amount of money and comes with high interest rates and fees. Instant loans are available in a few varieties: Payday loans. Also called a cash advance, a payday loan doesn't require collateral and offers you cash on the same day.What is the difference between instant personal loan and personal loan? ›
Instant loans take only minutes to be disbursed whereas a personal loan can take up to 4 to 5 days to get disbursed. Hence, insta loans are best when you have an urgent requirement and you can't wait long for the money to be disbursed.How do you explain a personal loan? ›
A personal loan is a type of loan that allows flexible use, short- to moderate-term repayment options and relatively quick funding. Whether you're trying to consolidate high interest debt, start a business or pay an expensive medical bill, a personal loan can help you accomplish your goal.What is a personal loan and how do you get one? ›
A personal loan is money you borrow from a bank or other financial institution with a set repayment period and consistent monthly payments. Most personal loans are unsecured, so you won't have to put down collateral to borrow the money.What is instant loan approval? ›
Instant approval for personal loans means that the lender disburses funds on the same day or the next day after receiving a loan application from qualified borrowers. Instant approval loans are convenient when you need emergency funding for unplanned expenses like medical bills.Is it hard to get accepted for a personal loan? ›
Getting a personal loan can be a relatively simple process, but to qualify, lenders usually require information about your credit history, income, employment status and current debt obligations. Your income needs to be high enough to cover the loan repayment amount and your other monthly expenses.