Instant personal loans are one of the most sought after loans in India. They are available to both salaried and self-employed people. Upon showing proof of income, personal loan is disbursed. An instant personal loan is not a burden if utilized properly. It can be taken when there is a shortage of money. But care has to be taken to repay it diligently. Otherwise, credit rating can come down, and this will diminish the chances of taking any more loans.

Instant personal loans can be secured as well as unsecured. The former is covered by security such as collateral while the latter is not covered by any security. Secured loans are generally of a higher amount. Unsecured loans are generally of a smaller amount.

Secured personal loans may have a lower rate of interest than unsecured loans. Obtaining both types of loans is a fairly simple process. In India, banks, financial institutions, and non-banking financial corporations provide secured and unsecured personal loans.

When is the best time to take an instant personal loan?

  • If you are in the middle of a financial emergency and need money urgently. Instant personal loans are disbursed within a day.
  • If you don’t have enough collateral to obtain a secured loan.
  • If you have a bad credit rating, you can take an unsecured instant personal loan, repay it diligently and regularize your credit rating.
  • You need funds fast and don’t have much time to spend doing the documentation of a regular loan or have time to wait for a lengthy banking approval process.
  • If you require a loan for a short period of time, you can take an instant personal loan.

Personal Loan

What are the top benefits of taking an instant personal loan?

  • Unsecured loans need no collateral. Therefore, they are an easy way to obtain funds. This is especially helpful for businesses that need working capital. The needs are cyclical in nature. After taking the personal loan, when the invoice is paid by the purchaser, the personal loan is repaid.
  • Unsecured instant personal loans are also helpful when planning for holiday or business travel to any location. It will cover flight expenses, travel expenses and accommodation costs. The money can be repaid systematically by the borrower over a period of time or foreclosed.
  • When compared to traditional loans, instant personal loans have the fastest turnaround time. The average disbursal time is 72 hours. There are instant personal loan providers like PaySense that provide loans in a matter of 5 minutes too.
  • Minimal documentation is needed. Most lenders only required KYC (Know Your Customer) documents, income proof and a healthy CIBIL score.

Factors affecting interest rate and interest rate on personal loans

The range of interest levied on instant personal loans is in the range of 10% to 18%. The rate of interest and quantum of funds proportioned to a person depends on several factors such as income, organization status, loan amount and repayment capacity. Generally, the higher the loan amount, lower is the rate of interest. Individuals associated with reputed organizations get offered attractive loans by banks and NBFCs. Again, all of this varies by bank. Not all banks have the same policies. Some banks only look at the credit history, income and job profile of the person.

What is the process of application of an instant personal loan?

There is literally no offline process nowadays. Everything is done online. An instant personal loan is deposited in the borrowers account without having to submit any physical documents. Only soft copies or Internet copies may be required. Personal information such as AADHAR card no, PAN Card and CIBIL score may be needed.

An existing customer has to upload all these documents along with the photograph online. There could be cases when a loan officer may visit the borrower’s place for physical verification. However, this is left to the discretion of the credit manager of the lending organization.

Do’s and Don’ts of instant personal loans

  • Keeping looking out for offers

Always be on vigil to look out for offers. Interest rates on personal loans for employees of certain reputed organizations are lower.

  • Compare rates

Different loan values have varying loan rates. Also, different borrowers have different lending rates. Make a comparison of the lending rates and make an informed decision.

  • Do not spread thin

Applying to multiple banks and not taking a loan may dampen the CIBIL score. It is wiser to apply to only one bank at a time. When applying to multiple banks, and if the loan approval gets rejected, this event is recorded in the CIBIL report. It may lower the CIBIL score.

  • Discounts for the repayment tenure

There could be discounts on interest levied based on loan repayment tenure. The lower the repayment tenure, the higher the discounts. It is always a good idea to take a personal loan with an average loan repayment tenure of 5 years.

What are the key features considered when computing amount of personal loan?

  • Borrower’s age – Loans are available to people in the age group of 21 and 60 years. A working professional at 24 will have a longer working life to repay the loan and hence can command a higher loan amount or a more relaxed repayment tenure.
  • Loan amount – Instant personal loan amounts can be as low as Rs. 5000 to Rs. 50,00,000.
  • Loan tenure – Loan repayment tenure is between 3 months to 5 years
  • Processing fee – Rs. 1000 to 2% of the disbursed loan amount
  • Documentation – Address proof, PAN, Aadhar, identity proof, income proof

FAQs

What is reducing rate of interest?

If a person has availed Rs. 50,000 and has repaid Rs. 25,000, then interest is charged only on the unpaid part. The EMI is recalibrated to form interest and principal components for the unpaid part. The new EMI is automatically debited from the borrowers account by way of ECS.

Why are personal loans expensive?

Unsecured personal loans have high-interest rates. Personal loans should only be used as emergency funds with the intention of repaying the money within a period of not more than 5 years.

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