Although both personal and instant loans provide the lender with emergency funds, certain features make them different from each other. These pertain to their nature, their requirements, and their loan amounts.
Nature: While a personal loan is always unsecured, an instant cash loan can be either secured or unsecured.
Collateral requirement: Personal loans are always collateral-free while instant loans can be collateral-free as well as collateral-based.
Required documents: Personal loans require more paperwork to prove the financial health of the borrower. In the case of secured instant loans, the paperwork is minimal, consisting only of the borrower’s identity and address proof. However, when obtaining an unsecured instant loan, the borrower is required to submit documents to prove their financial health, such as their credit score and income statement.
Upper limit: Up to INR 20 lakh can be procured using a personal loan. When it comes to a secured instant loan, there is no upper limit in the loan amount that can be availed. The lender can receive up to 75% of the market value of the pledged collateral as the loan amount. On the other hand, not more than INR 5 lakh can be obtained as the loan using an unsecured instant loan.
Instant loans are typically of two types- Unsecured loans that don't require collateral security and secured loans that require the borrower to pledge collateral security against the loan. Borrowers that get a instant loan get access to various benefits as compared to those that borrow unsecured loans. For instance, borrowers that avail secured loans get to borrow a higher loan amount. Since borrowers are required to pledge an asset whose market value needs to be about 30% more than the loan amount, the eligibility criteria are also relaxed. To avail a secured loan, you'll only need basic documents such as PAN Card and Aadhaar Card. However, this isn't the case with unsecured loans. When you apply for an unsecured loan, your loan approval depends on several factors such as your debt-income ratio, existing credit profile, and income status. Additionally, to be eligible for an unsecured loan, as a borrower, you will need to have a minimum income of INR 21,000 per month. Along with this proof of income, you will also have to submit other documents such as PAN Card, Aadhaar Card, Age proof, Income tax file, Account transaction statement, and sometimes even a guarantor. If you are looking to avail a quick, hassle-free loan, secured loans are the way to go.
The process of the gold loan application can become extremely easy when you apply for the loan through the Rupeek app or via a phone call. The loan officer will visit your house or office within thirty minutes of placing the loan request. The officer would verify the quality and weight of the gold and verify the authenticity of your documents. The documents required to avail of a loan are identity proof documents, such as PAN Card, address proof, and Aadhaar Card. An instant gold loan is one of the easiest types of loans to procure and doesn’t involve much paperwork. Documents such as your salary slip or income statement and your credit score, which are mandatory when it comes to an unsecured loan are not required for a secured instant loan.
An instant loan often charges a high loan interest rate to offer the convenience and flexibility that comes with it. However, there are ways in which you can reduce loan interest rates. And the ways are not too difficult. The first thing you should do is to increase your credit score and aim for a credit score near 900. The best way you can increase your credit score is by repaying your EMIs on time. The second thing you can do is to apply with someone who has a stable source of income. If both the applicants have high net monthly income, then the loan interest rate can drop substantially. If none of the above methods applies to you, then the best thing you can do is to apply for a secured loan, like a gold loan. The interest rates of secured loans can be as low as 0.89% per month.
If you are looking to avail credit in any form now or in the future, it is very important to maintain a respectable credit score. Credit scores play a key role in determining your loan amount, loan term, and loan interest rate. The better your credit score, the higher your chances of having the upper hand when it comes to deciding the various terms of your loan. 700 is considered a healthy credit score. Anything south of 700 could cause mistrust in the minds of lenders. The most foolproof way of increasing your credit score is by availing an instant cash loan online and arriving at an EMI that you can afford to easily payback. Make sure to maintain a balanced debt-income ratio. For instance, if your credit score if very low, avail a loan of smaller value. This will enable you to repay it easily and also extend your credit limit for any loans you wish to avail of in the future.
An instant loan is one of the most flexible loans in the financial market. It is depending on your financial health as well as your preferences that the loan term and the EMIs are determined. The shortest span of a loan term can be one month and the longest can be up to 5 years. Which one you prefer depends on your financial health. When you opt for a long term loan, even though your EMIs may be a lesser amount, you will end up paying more, for the interest component. If your loan term is short, the EMIs will be a bigger amount but the amount you pay towards the loan component will be less. Paying the EMIs on time can enhance your credit score. It is advisable to pick the loan tenure depending on your EMIs, the interest rate as well as your financial state.
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