What is an Instant Loan? Types, Benefits

We live in a fast-paced world. Unlike our forefathers, who used to focus on savings and spent limited money to support their minimalistic lifestyle, maintaining the standard of living in a modern city can be financially challenging. This has given rise to newer means of financing the fund gap.

One such solution is an Instant loan. What are instant loans? To put it simply, they are short-term personal loans that provide funds to individuals for personal use without collateral. In this blog, we cover all about instant loans and how you can get an instant loan.

What are Instant Loans?

Instant loans as the name suggests are personal loans required to meet urgent financial needs in the short term. If you require an instant loan, you can apply online and get approved instantly. Many banks and financial institutions also offer pre-approved limits for instant loans that you can get within just a few clicks. Here are some key features of an Instant loan:

• No Worries of Credit Score: As your risk profile and income are already considered while offering pre-approved limits, you can apply for an instant loan without worrying about your credit score becoming an impediment. 
• Loan Term: Instant loans are for a shorter term.
• No Collateral: Instant loans are collateral-free and there is no restriction to use the funds for specific expenses. 
• Higher Interest Rates: As these loans are instant and short-term, banks and financial institutions face a higher risk of default. Hence, the interest rates are higher.
• Default: In case you default on instant loans, you can damage your credit scores quickly.

So, if you require an instant loan, it is best to understand the terms & conditions of repayment and compare what different lenders are offering. Getting an instant loan can well serve your requirements for quick financing of important expenses.

Types of Instant Loans

Not all short-term loans are instant loans! There is a clear distinction. To qualify as an instant loan, it is important, that an applicant who requires an instant loan can get it, within no time. Here are the most popular types of instant loans offered by banks and financial institutions:

• Pre-approved Personal Loans: To reduce the loan turnaround time, banks and financial institutions assess the income, age and credit scores of some credible customers in advance. These loans can mostly be availed and approved online within just a few clicks. Hence, they have become very popular, especially among salaried individuals.
• Instant Personal Loans: Many banks and financial institutions offer the facility of online loan applications. After applying online, you can visit the branch with a copy of the required documents and get the loan approved within minutes. This saves a lot of time and effort.
• Top-Up Loan: Suppose your salary or credit score increases and you are eligible to get a higher loan amount. Is it feasible to repay the first loan and then apply for another personal loan? To save time and cost, you can ask for a Top-Up loan. You can get the balance amount above the loan already taken.
• Loan/Overdraft against FD: Loan/OD against FD is the fastest way to obtain an instant loan. If you own an FD, your bank or financial institution can offer 70-95% of the value of the FD as a loan or OD if you require an instant loan.
• Overdraft on Salary: You can convert your Salary account into an instant OD account by getting a limit approved in advance. Whenever you are short of funds, you can overdraw the account up to the limit. As your salary gets credited to this account, the OD gets repaid.

How You Can Get Instant Loans?

Having learned about instant loans, you would ask, how can I get an instant loan? Let’s understand how the process of instant loans works. 

*Usually, the processing fee is waived on instant loans. However, banks or financial institutions may charge a nominal amount before loan disbursement.

Completely Online Process

• Online Application: You can fill out an online application form on the website or mobile app of the bank or financial institution and include:
  • Personal Details of the applicant
  • Proof of Address Details
  • Proof of Identity Details
  • Income Details

If you have a savings account in the same bank or financial institution, these details are auto-populated. So, you can only check them and move on.

• Pre-approved Eligibility: In the next step, you can check your eligibility and the pre-approved loan amount.
• Check Interest Rate: At this stage, the system displays the details like interest rate, loan term, EMI, etc. You should check it carefully and proceed with the loan disbursal.
• Repayment Schedule: Once you finally submit your loan application, you get the repayment schedule showing the Principal and interest component separately over the loan tenure.
• Setup Standing Instruction: You can set up the EMI payment by giving a standing instruction for loan repayment to your savings/salary account.
• Disbursement: You get the required instant loan amount directly in your account.

Partially Online Process

• Online Application: A partially online instant loan means that you can carry out the loan application process online and the rest of the procedure is offline. The same application process is followed as above. However, at the end of this step, you get the appointment for your loan approval along with the required documents. These are:
  • Salary Slip
  • Bank Statement
  • Proof of Address
  • Proof of Identity
  • Any other document required for the loan process

You can approach the loan officer at the time of appointment, with the documents, and get your loan approved instantly.

• Eligibility Check: The loan officer checks your documents, loan term and credit score. Based on these details, he/she calculates your loan eligibility.
• Check Interest Rate: The loan officer also tells you the interest rate and EMI. You can agree to the terms and conditions to further the process.
• Documentation: Basic loan documentation is prepared and signed which contains the agreement, stamps, repayment schedule, etc.
• Repayment Schedule: You can check the principal and interest component throughout the loan period in this repayment schedule.
• Setup Standing Instruction: You can add a standing instruction in your savings/salary account for the EMI payment.
• Disbursement: The loan is disbursed into your account.

What are the Advantages of Instant Loans?

Now that you have understood how you can get an instant loan, you should know about the advantages of getting an instant loan. Here’s why taking a personal loan can make life easier for you:

• Quick Funds Availability: If you need money immediately, applying for an instant loan is your go-to option. With faster loan disbursement, it reduces the time, effort and cost involved.
• No to minimum paperwork: Usually, instant loans are processed online requiring no paperwork. Even if the process is partially online, there are minimum documentation requirements. This expedites the process and reduces paper wastage.
• Collateral-free: An instant loan is collateral-free. This means you do not need to mortgage or pledge any property to get the loan.
• Instant Processing: Traditionally, getting a loan is seen as a tedious process. However, applying for an instant loan means that the process is carried out superfast and you can get the loan amount in your account within no time.
• Flexible use of funds: Unlike car loans or home loans that are given for a specific expense, there are no restrictions on the usage if you require an instant loan.
• Short-term Repayment: Long-term loans exhaust their principal amounts very slowly. Hence, the total interest can even be higher than the principal amount. This is not the case if you require an instant loan. The short-term repayment ensures that you exhaust the principal quickly reducing the overall interest cost.

Conclusion

If you were wondering, how I can get an instant loan, this blog should paint a clear picture. Keeping true to their name, instant loans are short-term loans that can be quickly availed. With the collateral-free nature of the loan and quick processing, getting an instant loan means you can get funds as and when required. However, it is a good practice to compare the interest rates, terms & conditions and the repayment schedule before making your final decision.

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