#FinancialBytes: All you need to know about Instant Loans
What's the story
Sometimes, it becomes tough to meet one's financial commitments and in such cases, the quickest available solution is an instant loan.
Well, it's true that an instant loan helps you meet the financial needs 'instantly' but is it a good approach or a bad one? And how does it affect your finances in long run?
Let's discover this by weighing its pros and cons.
Advantage #1
You can get up to Rs. 25L, in hours
The biggest advantage of an instant loan is that it is available up to a staggering limit of Rs. 25 lakh.
Notably, the minimum amount stands at Rs. 1 lakh.
Moreover, you can get it approved in just a few hours or at worst in a day's time.
True to its name, it really helps you in meeting your financial needs 'instantly'.
Advantage #2
You do not need collateral or guarantor for instant loan
Another advantage associated with instant loans is that you are required to provide any collateral or guarantor against the borrowed money.
Moreover, instant loans involve simple and minimal documentation. Besides applying for an instant loan online, you may also send the supporting documents required for the loan via an e-mail to the lender.
Advantage #3
Another plus: Instant loans come with flexible repayment options
Another benefit of instant loans is the availability of flexible repayment options.
A flexible repayment facility allows you to select the repayment option that best suits your needs.
A few popular flexible repayment options are as follow:
Accelerated repayment: Lets you increase EMI amount with increased income.
Step-up/Step-down repayment: Low/high EMIs in initial years.
Balloon repayment: 30-40% repayment of loan amount in last EMI.
Disadvantage #1
But, instant loans are more expensive than other loans
Yeah, it's true that instant loans help you meet your financial commitments in almost no time, but they do charge a higher price for that.
For instant loans, you are charged an interest rate higher than almost all the other types of loans. The instant loan interest rate ranges between 15% to 21%.
Disadvantage #2
An instant loan generally comes with stricter terms and conditions
Although a financial institution does not require you to present a collateral or a guarantor for an instant loan, it may associate stricter terms and conditions on your borrowing.
These stricter terms are typically applied to your repayment schedules, EMIs, and pre-closure terms.
So, it's advisable to take a careful note of these terms and conditions.
Disadvantage #3
You risk falling into debt trap with an instant loan
Most of the instant loan applicants at times get overzealous about the amount that can be borrowed. (since the maximum limit is Rs. 25L)
This may lead to over-borrowing which, in turn, may increase a person's financial burden due to high-interest rate carrying EMIs.
Thus, with instant loan one risks falling into a debt trap.