Very few have not had their financial emergency when money is needed urgently. The traditional loan process is invariably time-consuming and laborious, involving long approval times, piles of paperwork, and stringent eligibility criteria. This could be a real challenge for someone with a low credit score or who does not have access to traditional banking services. Most of these apps require minimum documentation, and creditworthiness is measured in other ways than traditionally done, opening the market to a large group of people.
Instant loan apps work this way: a user downloads the app, registers an account, and fills in basic information on a simple application form. After, the platform makes use of data analytics and machine learning algorithms to evaluate the creditworthiness of such a person. If approved, the disbursed loan amount will be credited directly into the user’s bank, all within minutes. This model offers benefits to users in terms of instant money availability, flexible schemes for repayment of the loan amount, and ease of use. Through instant loan apps, one can meet their financial requirements immediately without bothering much about the loan procedures.
The market is flooded with innumerable instant loan apps today in this digital age, where every single one among them toasts their being the best. From very established platforms like Paytm or even Google Pay, it goes to companies with whom probably one might not have any idea as of now. Still, the option lists keep sounding endless, with even firms like Hero or L&T that traditionally don’t have anything to do with the financial sector offering personal loans today. Of all that is available, how can users decide which instant loan app is the very best?
The Truth about Personal Loans
Most of the time, personal loans are costlier than secured loans like home or car loans. Why? The answer is simple: personal loans are unsecured. Had you availed yourself of a house or car loan and stopped paying, the bank could take possession of your property or automobile.
Why Interest Rates Matter
When considering an instant loan app, the most important thing one would look at would be the interest rate. Ideally, a good personal loan should be одного in this range between 11% to 25%. Any interest rate above that is really not worth the financial burden one has to pay for it. For example, interest rates for loans available at most banks and other NBFCs like ICICI, SBI, HDFC, and Axis Bank, can vary from about 10.5% to 25%. Comparatively speaking, most of these instant loan apps start off at around 28.8% and can go up to 45%.
Hidden Fees: Processing Fees
There’s also the processing fee, another critical aspect. The processing fee for banks goes up to 1% to 3%, which again is close to being negotiable. As for instant loan apps, some processing fees run as high as 15%. If you borrow 1 lakh at a processing fee of 15%, you get only 85000 and yet have to pay back the full 1 lakh plus interest.
Drawbacks of Instant Loan Apps
While instant loan apps may be very tempting because of the ease and speed of processing, there are a lot of negatives associated with them. Most of these apps will seek far-reaching permissions, which include access to your contacts and your gallery. In case you end up in default, they may start contacting your relatives and friends; this could be very embarrassing and will pressurize you into making payments.
The Best Approach Ends
A good personal loan will be the one that has the least interest rate, least processing fees, and a reasonable repayment tenure. Traditional banks generally come out better due to their lower interest rates and relatively clearer policies.
Conclusion
Always read the fine print and know exactly what you’re getting yourself into. If possible, use traditional banks rather than instant loan apps in terms of personal loans. However, if you really must, then go for the app with the best terms; but still be very wary of all the pitfalls.
One has to be financially literate and cautious while deciding the source for availing of a personal loan. Make informed decisions; otherwise, it can drag you into the debt trap.
