Personal loans in India are one of the most opted for loan options, especially when availing of quick funds. Apart from key features like no restriction on end usage of funds, minimal documentation, no collateral requirement, and quick disbursal of funds, another aspect of personal loans that comes to the rescue when extremely urgent financial assistance is required by the borrower is the availability of personal loan. As not many people are aware of this product and the features and benefits that it offers, let us deep dive a bit and understand the tips for securing this loan.
What is Instant Personal Loan?
It is an unsecured product available as a source of urgent funds for both salaried and self-employed categories of borrowers. This loan option provides instant credit access whenever needed, without any requirement for collateral or security. The tenure is short to medium term for most lenders offering this facility. However, the personal loan eligibility factors and the parameters factored in by lenders before disbursal are something that every borrower should know about. To get the loan application approved and avail of the credit instantly, there are some key things to be factored in by the applicant. But before we discuss them, let us know the features and benefits of these personal loans.
Features & Benefits of instant personal loan
No collateral or security requirement- As these loans, just like regular personal loans, are unsecured in nature, there is no need for the borrower to provide any collateral or security or margin against availing of the loan amount.
No restriction on end usage of funds- These loans do not involve any restriction in end usage of loan proceeds, except for speculative or illegal purposes. So, irrespective of the purpose of the loan, whether for business expansion, medical emergency, child’s higher education or wedding, vacation abroad, etc. An instant personal loan can be availed to fulfil all such purposes.
Instant disbursal- As their name suggests, these loans involve instant or near-instant disbursal of funds by the lender. Since this loan is mostly pre-approved, this feature facilitates extremely quick disbursal of funds. Furthermore, the development of end-to-end digital processing of these loans is what acts as another catalyst in its quick disbursal.
Minimal documentation-Involvement or nil or minimal documentation is what acts as a key feature in making these personal loans an advantageous product for borrowers. As pre-approved loans are usually offered to existing or prospective borrowers after lenders themselves checking their eligibility and credit history, involvement of documentation becomes negligible, thus enabling an even more quick and smooth process of disbursal.
When should you avail of an instant personal loan?
- If you are facing an urgent financial emergency such as severe illness or income pay cut.
- If you lack any margin or collateral/security to provide against the loan.
- If you cannot wait for a regular personal loan and wish to get immediate funds upon getting a pre-approved instant personal loan offer.
- As personal loans do tend to carry high credit risk for the lender, thereby resulting in relatively higher interest rates of these loans vis-a-vis secured loan options like a gold loan, personal loans should be amongst one’s last resorts of credit access if possible, after assessing other credit options. For instance, existing home loan borrowers may instead avail of a top-up home loan as it is cheaper.
- Applicants having adequate security, margin or collateral can consider availing of secured loan facilities like loans against property, gold loans, loans against securities, etc. The interest rates of these are likely to be lower than those of these personal loans.
How to increase chances of approval and boost eligibility?
To get the loan application approved and avail these personal loan’s credit access instantly, it would be prudent to follow these financial tips:
Check your credit score
Lenders factor in applicant’s credit score as a crucial parameter when evaluating eligibility for these personal loans. Applicants having good credit scores generally have brighter chances of getting loan approval. Lenders tend to consider such borrowers as financially more disciplined, hence depict them as a carrier of lower credit risk when compared to borrowers with a low credit score. Whereas on the other hand, those possessing a low credit score may either face personal loan rejection or might be offered the loan at higher interest rates. This is because such borrowers tend to involve higher credit risk for the lender.
Select tenure as per your repayment capacity
The instant personal loan applicant’s repayment capacity is taken into consideration when lenders evaluate the eligibility. The applicant’s current income and mandatory monthly expenses, and debt obligations are assessed by lenders. Remember that applicants with higher mandatory debt repayment obligations may have lower chances of getting their loan application approved due to the higher risk of default. Such applicants can boost approval chances by opting for a longer loan tenure, as this reduces the EMI amount, hence increasing affordability and eligibility for a loan.
Compare offers and rates of various lenders.
Since a wide range of lenders, whether in the form of banks, fintech, NBFCs, or other financial institutions, offer these types of personal loans, their interest rates, fees, and other product features tend to widely vary. This makes it prudent to compare the features and offers of maximum lenders possible before zeroing in on any. Always make sure to compare not just interest rates, but other product features too, like repayment tenure, loan amount, processing fees, repayment options, prepayment charges, etc. Select the lender who seems most suitable for your financial requirement.
Avoid frequent switching of jobs.
Job stability and employment history of the applicant is a parameter often factored in by lenders before offering these personal loans. Doing frequent job switches, also termed job-hopping, might be considered as a sign of career instability by lenders. This may lead to lenders hesitating in lending to such applicants, thus making it prudent for people to avoid frequent job switches, especially if planning to avail of a loan in the near future.