What is an Instant Loan?

Introduction

Instant loans are usually personal loans that are taken for a short period of time. Instant loans can be availed quickly and seamlessly as it does not require a high credit score. People often choose instant loans in emergency situations that require instant money. However, there is a major drawback of an instant personal loan, and that is the high rate of interest that needs to be paid. If you want to know more about instant loans, be sure to read this article thoroughly. 

What are the types of instant loans?

While an instant personal loan might be the most commonly availed instant loan, there are some other types of instant loans that are also available. Below are a few examples.

• Short-term personal loans: Short-term personal loans or STPLs are gaining popularity with every passing day. This is because people can get a loan for as low as 1000 rupees and can pay it back after a short duration. These loans are very useful in dealing with sudden shortages of money. The procedure to apply for a STPL is simple as these can also be availed online. Several digital lenders provide STPLs once your documents get approved, which is not a long process compared to other loan application processes. 
• Personal Loan: As mentioned in the previous segment of this article, personal loans are the most commonly availed form of an instant loan. The application process is simple and quick, as document verification is done almost instantly, and some digital lenders offer an instant personal loan without any documentation as well. The loan amount can range anywhere between 20,000 to about 40 lakhs based on the credibility and eligibility of the person applying for the loan. While the tenure to pay back a personal loan is usually flexible, the rate of interest is quite high compared to other secured loans. 
• Top-up Loan: A top-up loan is one that is availed with an existing loan, such as a home loan, car loan, or existing personal loan. The paperwork is cleared faster than ever if you are eligible for a top-up loan because all the necessary documents are already available to the lender or the bank from your existing loan. Thus, all you need to do is complete some basic formalities that are associated with this kind of loan. 
• Instant loan against credit card: If you are a credit card holder, you will be offered a loan against your credit card by your credit card service provider. The terms of repayment and the amount of money you can take as a loan will depend on your credit score and credit card payment history. This pre-approved loan also requires minimal processing, and you can apply for this loan by contacting your respective credit card service provider. 
• Loan against your savings and insurance: A loan that is availed against your savings, such as FD, NSC, or any insurance, is known as a demand loan. Remember that the loan amount you get solely depends on the maturity value of your National Savings Certificate or your insurance policy. If you have a good repayment history, you might be eligible for a loan that is almost 90% of your maturity value. 
   

What are the advantages of an instant loan?

Instant loans are quick and easy ways to overcome any financial emergency or consolidate any other financial aspect that needs to be resolved urgently. However, you need to understand that people don't apply for an instant loan only in the case of an emergency but also for several other reasons, like paying for a quick home renovation or for a trip that they have been dreaming of but can't seem to afford at once. If you are skeptical about applying for an instant loan, the following points will set you straight as they contain all the possible benefits of availing of an instant loan. 

• Paperless method of loan approval: If you apply for a personal loan, you will have to provide your lender with all the necessary documents and papers, and only after that will your request for a personal loan be approved. But that's not the case for an instant online loan. All your necessary information will be uploaded via the Internet, and if you are a pre-approved or pre-qualified member, you can avail of an instant loan with minimum to no paperwork. This makes availing of an instant loan very hassle-free, smooth, and seamless.
• No need to issue any collateral against the loan: An instant personal loan does not require any collateral or security against an instant personal loan, unlike most other available types of loans. This is because instant personal loans are unsecured loans. 
• Instant and prompt disbursal of funds: As we mentioned earlier, instant loans are your savior when you need money instantly due to any emergency. The disbursal process is carried out in no time once your instant loan application gets approved. This enables you to have the necessary funds in times when you need them the most. 
• Nominal Processing time: We can't emphasize enough how quickly an instant loan gets processed. The processing period of an instant loan is way less than any other type of loan available in the lending industry. 
• Flexible repayment tenure: The repayment tenure of most personal loans is quite flexible. This is usually not the case with the other types of loans where your repayment tenure remains rigid. Instant loans offer you the comfort of choosing your repayment tenure based on your preference. However, there are some basic guidelines regarding your repayment tenure that will be provided to you by your lender that you need to follow. 
• Compatible interest rate: Yes, it is true that the rate of interest of an instant personal loan is higher than most other loans you can avail of. However, the interest rate can be lowered if you have a good credit score. Thus, you can get an instant loan at quite an affordable rate and keep the overall cost of your loan low. 
• Customizable loan amounts: People applying for an instant loan will be given a choice to apply for a loan of their desired amount, provided that the amount they are seeking falls between the minimum and maximum loan amount that their loan provider specifies. 
   

Eligibility criteria for availing of an instant loan

As discussed earlier in this article, the process of availing an instant loan is way easier as compared to most other types of loans that one can opt for. That is why the eligibility criteria are also not that complex or rigid. An instant loan is usually granted based on minimal and basic documentation. In most cases, the loan is granted in a paperless manner when applying for the loan online. However, some basic eligibility criteria must be checked off before granting an instant loan to the loan applicant, and those eligibility criteria are listed below. 

• Credit Score: If you want to avail of an instant personal loan at a lower rate of interest, it is advised that you maintain a good credit score of 750 or above. This way, you will be able to get instant personal loans at an affordable rate. 
• Age of the loan applicant: Different lending institutions or banks have different age criteria. Thus, it is essential that you check whether your age qualifies for an instant loan from that particular bank or lender. Though the minimum age required to apply for an instant loan might vary, most banks and lenders offer a loan if you're 18 or above, and some other lending institutions or banks claim to provide an instant loan to applicants who are at least 21 years old. 
• Occupation of the loan applicant: Most banks and lending institutions offer instant loans to both self-employed and salaried employees. However, be sure to check the eligibility criteria before you apply. 
   

What are the steps associated with an instant loan?

Getting an instant loan is quite simple and does not require much time as not many steps are involved with it. The basic steps required to avail of an instant loan are given below, so don't forget to check them out. 

1. Submit an application for an instant loan: The first step of availing of an instant loan is to apply for it to a reputable bank or lending organization. Be sure to do your research before applying for a loan, as you will have a clear idea about which one is most suitable for you.
2. Documentation process: The documentation process is not that elaborate and is done in no time if you provide all the necessary information and details correctly. Some banks require you to give a post-dated check along with the other documents. 
3. Receive your loan amount: Once your profile is approved for a personal loan, your account will receive the money from the lender. 
4. Repay your loan: The final step is to repay your loan amount within due time or extend it if necessary but don't let it get to default, as it will hamper your credit score. 
    

Facts to keep in mind while opting for an instant loan

Instant loans have become popular as these are short-term roles with flexible repayment terms and conditions. However, there are some things that you should keep in mind while you avail of an instant loan. 

Most banks or institutions that offer instant loans will charge you a one-time fee for processing your loan. The interest rate can be high at times, so calculate the total repayable amount and scrutinize how you will pay it back on time to avoid default penalties. Default penalties are charged by most lenders when you fail to pay your EMI. Lastly, make sure to take instant loans only when you really need them and use them prudently to avoid any repercussions. 

You must know that there are several types of instant loans that are available, and the most common ones are mentioned in the early stages of this article. Be sure to take your time and understand the pros and cons of each type of loan to determine which one suits you better. For example, if you have been able to maintain a good credit score, apply for an instant loan from your credit card service provider. Similarly, if your insurance or savings maturity value is high and you have a good payment history, apply for a loan against your insurance.