The financial world is undergoing a rapid transformation with an ever-increasing number of banks and financial institutions turning to technology when at a time, the corporate lending scenario looks abysmal. Banking related processes have now become speedier and paperless. Most of the banks have propelled their functioning with the launch of instant loans thereby drastically cutting down the loan approval turnaround time.
Nowadays, instant loans are so well-known that most loan seekers lean towards them over the customary personal loans. Undeniably, instant loans, by and large, aim to lessen the borrower’s liabilities and save an enormous amount of time for lenders and borrowers alike.
An instant loan can be very convenient, but your thorough awareness of them is a mandatory prerequisite. Presently, you can avail a credit on hotfoot – paperless and pre-approved. However, a bank’s recklessness for attracting business should not compel you to take a loan you do not require.
Here is a glance at what is on the shelf and seven things you should be cognizant of prior to opting for an instant loan.
Instant loans can be applied online from anywhere be it your home, office or while traveling back from work in a cab and stuck up in traffic snarls etc.
You simply need to visit the bank’s website, log in either through your Net banking facility or the bank’s mobile app, fill up the details in the online application form, attach self-attested soft copies of the necessary documents and finally submit your application.
You can finish off the process in a time as short as 10 minutes. Based on your eligibility and the applied loan amount, the bank will swiftly adjudicate the loan approval and facilitate the credit of the funds straight to your bank account.
Sometimes, pre-approved loans and instant or paperless loans can be confounded. There is a pragmatic distinction between the two. In case of pre-approved loans, banks, in advance, assess the customer’s eligibility and put an offer of the loan, which the customer at his sole discretion may or may not take up.
Or in other words, pre-approved instant loans work only for those individuals who carry an existing relationship with the bank either in the form of a savings account holder or a borrower. The bank, therefore, already has the requisite details of the customer’s salary and previous credit records—the key elements essential for offering the loan.
1. Indulge in mindful borrowing
Instant loans are anything but difficult to get. However, ensure that you don’t let the simplicity of acquiring them deceive you into imagining that they are easy-breezy money. Abstain from making recurrent borrowing a tendency to bail you out of every financial adversity.
Resort to a more careful borrowing, only when you are left with no other reasonable option to make arrangements for the funds. Repeated application of instant loans will also impact the borrower’s credit score in an unfavorable manner.
2. Explore less expensive alternatives
As instant loans are simple to access and facilitate prompt disbursement, it can keep you from taking a gander at other loan choices. For instance, an education loan can be obtained at a much-reduced rate of interest. Nonetheless, individuals may prefer the faster disbursal angle and cede the cheaper interest rate, even at the cost of settling for an inflated loan fee.
3. Pay close attention to the terms and conditions
In addition to the interest cost, there are other costs that you need to bear. Some instant loans may charge a penalty amount for prepayment. If you prepay the loan you can save a sizeable interest cost. Interest rates of traditional personal loans are typically lesser than instant loans. Also enquire with clarity about the processing fee, late payment fee, and administrative cost structures. Banks normally charge up to 1-2% of the applied loan amount as the processing fee.
4. Keep a check on your declining borrowing limit
An instant loan, being an unsecured loan diminishes your borrowing ability till the time it is repaid. Assume you need to purchase a home on loan, yet since you have officially availed an instant loan and are remitting EMIs for it, the capacity of your repayment would consequently minimize to that level and you will most likely be unable to acquire more loans unless the ongoing instant loan is fully paid back.
5. Ensure personal information security
Apparently instant loans may look straightforward, however except if you accurately furnish all the necessary details, it may not happen instantly. Likewise, as these loans are kept running on technology, don’t brush off glitches at the time of application. Be aware that your digital footprint is imperative because some lenders even exhibit a propensity to rely on your social media conduct. Just in case you are comfortable to disclose your personal details to these apps and websites should you try availing these products.
6. Window-shop for better interest rates
Engage in some shopping around for better and flexible rates. Refrain from actually applying just for the purpose of checking the interest rate. This will lead to spontaneous and stiff inquiries about your CIBIL score which can negatively impact your credit rating. You can find out the prevailing interest rates by calling the customer care.
7. Ensure to service the EMIs regularly
Nobody knows about your loan repayment capacity better than you. Not in any case your bank does. Therefore, be honest and do a fair evaluation. On the off chance you believe that your EMI repayment ability is tenuous, do not go for the instant loan. Falling through your EMI servicing will cause penalties and likewise damage your credit score.
Remember, there are a few banks who, when talking about instant loans give you only the instant approval and not the whole loan. The vast majority of the instant loans are basically personal loans owing to lower requirements of documents for loan approval.