“Instantly take personal loan without documentation”, this type of advertisement you must have noticed on different apps. Instant personal loans, also known as quick loans or instant cash loans, are unsecured loans offered by non-banking financial companies (NBFCs) and fintech platforms.
Unlike traditional loans that involve lengthy approval processes and extensive documentation, instant personal loans leverage technology to expedite the application and approval process, often providing funds within minutes.
When to Consider Instant Personal Loans?
1. Emergency: You should always analyze your situation whether you need a loan or not. It is always recommended to avoid any personal loan even if it is offered instantly until you need it.
2. Meet short-term funds: You can opt for it when you face temporary cash flow gaps between paychecks, these loans can bridge the financial shortfall.
3. Lower Interest rate: You know banks take more time to sanction loans and may also charge higher interest rates compared to the instant loan approval apps. If you are getting a lower interest rate, you can go for it.
Parameters to Evaluate Before Taking a Loan?
1. Read terms and conditions carefully. Always check hidden terms and conditions and read them carefully, take your time and don’t hurry up. It will take hardly 15 minutes, which can save us from unnecessary issues in the future.
2. Check Interest rate: You should check interest rate per annum before availing any loan amount. It usually ranges from 13 to 15% per annum. It may be 18-24%, if your CIBIL score is not good.
3. CIBIL Score: Verify your CIBIL score before applying for a personal loan through instant loan apps.
4. Repayment tenure: Ask yourself how much monthly EMI you can pay and for many months. Choose months of repayment wisely so that it should not affect you financially and your CIBIL score.
5. Foreclosure Charges: I would suggest, you should take a loan from those companies which allows you to foreclose your loan without any charges. Read the terms and conditions related to foreclosure and its charges.
6. Processing fee: this type of fee affects a lot as it is also added in the monthly EMI. Check those lenders who are providing the minimal processing fee for your personal loan.
7. Lender’s Reputation: It is recommended to check the certificate of registration of the company under RBI and have been following all rules and regulations. Check wisely their reviews posted by the customers.
Instant Loan Apps Are Not Always Your Friend
Debt Trap Potential: The ease of access can be a double-edged sword. Frequent reliance on instant loans can lead to a dangerous debt cycle, especially with high-interest rates.
Hidden Fees: Be wary of processing fees, late payment penalties, and other hidden charges that can inflate the overall cost of your loan.
Credit Score Impact: Multiple loan applications within a short period can negatively impact your credit score, making it harder to secure future loans at favorable rates.
As per RBI Guidelines, you should always ask for the key fact statement that allows a borrower to carefully check the charges such as annual percentage rate or the cost of borrowing money, interest rate per annum, application fee, processing charges, late payment penalties.
Exploring Alternative Loan Options
A. Traditional Banks & NBFCs: Consider a personal loan from a reputable bank or NBFC. While the application process might be slightly longer, you may get better interest rates and loan terms. You can also negotiate with your bank and can always get a loan with lower interest.
B. Credit Cards: Utilize credit cards for short-term financing, leveraging interest-free grace periods and reward benefits.
C. Friends & Family: Borrowing from close friends or family can be a viable option, but ensure clear communication around repayment expectations and interest (if applicable) to maintain healthy relationships.
Conclusion
The instant personal loans that Indian apps offer make it easy for people who need money quickly to get the money they need. But it’s important to be careful and thorough when getting these loans, taking things like interest rates, payback terms, and the lender’s reputation into account.
You can make choices that are in line with their financial goals and values by looking at these factors and exploring other lending options. This will help you have a healthy financial future. Remember that being financially independent starts with making smart decisions!
Use our Calculators: Calculate Monthly Investment in Sukanya Samriddhi Yojana; Calculate Interest before Buying Insurance; Mastering Financial Statements with Example for Stocks
