The primary purpose of taking a loan is to extinguish the necessity of cash. Such a necessity of cash when turns into exigency. Then the person requires liquid cash instantly. To get relief from the financial crisis then the person starts to search for a personal loan. It is one of the easiest forms of loan that can be availed by a person instantly with a low rate of interest.
What is a personal loan?
With the hideous price rise of basic commodities, people are utterly harried to run their family. For this reason, when they wish to spare their earned money for some other part like renovating the house or buying a car or repairing a house, they cannot fulfil any of them because of the shortage of cash. Here comes the role of instant loan by which your need for immediate cash can be put out.
A huge number of people like to take a personal loan over any other type of loan. The reason for it can be, easy repayment option and flexibility of tenure. In terms of category, this type of instant cash loans comes into the category of unsecured loan, which both non-banking financial company and banking company and other money lenders also provide.
Although every individual is eligible for taking a personal loan, lenders sometimes put some criteria like the income band, credit score, background verification, and potential to repay the outstanding amount.
Discussing the objectives, by the term personal loan, you can understand that it is a type of loan that the money lenders provide to mitigate the personal needs of an individual. Here are some objectives–
- To mitigate the need for cash if you planned for a family get together abroad.
- To transform your house into your dream home
- To provide your child quality education
- To meet the emergency medical need
- To invest in the business as a beginner
- To pay advance for buying a new house
Depending upon from lenders to lenders, the basic criterion of eligibility factors are –
- Background verification
- Credit score (bad credit score can affect the eligibility)
- Monthly net-take-home
- Type of job and type of company the borrower working with
- If self-employed, then the yearly turnover of the business
- Potentiality of repayment
Other money lenders used to provide instant loans to those without doing much background verifications. So if you are worried about bad credit scores or unemployed for a long, you can reach those money lending bodies.
Tenure and rate of interest:
People choose this particular type of instant loan because of its minimum tenure and comparatively low-interest rate. One has to repay the whole outstanding amount within 5 years. At the same time, the borrower can foreclose the total due within the maximum timeframe given by the lenders.
Another impressive factor about the instant loan is the lower interest rate compared to other long-term loans.
- Quick disbursal of a loan is one of the most convenient factors of taking an instant loan. When you urgently need cash, going for an instant loan is just a perfect decision. In most cases, the loan disbursed on the same day or may take within 7 working days maximum.
- It is an accurate example of what we call a ‘multiple problem 1 solution’. While you have to take only an auto loan to buy a car, you can easily apply for a personal loan to mitigate all your personal problems. From renovating your house to wipe out the urgent need for liquid cash, all purposes can be solved with personal loan help.
- Zero mortgage requirement is another benefit of taking this type of instant loan. For example, if you apply for a gold loan or loan against property, you have to mortgage your personal belongings to the money lenders as those are categorized as secured loans.
This type of instant loan is categorized as an unsecured loan, so there is no requirement to keep a mortgage. Therefore, you are free from the burden of collateral damage.
- When you are applying for an instant loan, you should not forget about charges and fines. Generally, this type of loan often comes with hidden charges and fines. Many money lenders used to apply processing charges of 1-6% of the total sanctioned amount. This processing charge may be deducted either from the loan amount or added to the first month instalment as an extra charge.
- You can repay the credit card dues as per your choice. If you are running with a shortage of money in one month, you can pay the minimal amount from your total outstanding credit card due. So there is an ease of choosing your monthly repayment amount.
But in the case of an instant loan, the borrower needs to repay a uniform amount every month on a particular date. Failing this, you will be charged a penalty, and the credit score will come down.
- Although instant loans seemed to be mitigating the need for cash immediately, on the other, it will ultimately enhance the burden of liability. How? It might happen that people using credit cards often found unbearable to repay the instalment every month.
So, to omit the credit card bills from your monthly expense will ultimately congeal the amount of liability when you apply for the personal loan. After paying the full credit card, the lender will enhance the credit limit, which will encourage you to spend more.
This is why repaying the complete outstanding with the help of an instant loan is ultimately an imprudent decision.
After discussing the pros and cons, we can conclude that instant loans are not a wise decision for every borrower. Although this will meet your emergency needs but consummately, it can cause your bad credit if you fail to repay even one instalment. Moreover, if you have overspent, then borrowing an instant loan is not a good idea.
But this type of instant loan can also be a saviour for a medical emergency and educational purpose. Therefore, we advise before applying for any loan, be careful and be ready to repay the dues every noted day.