Factors to Consider When Getting an Instant Loan

Factors to Consider When Getting an Instant Loan

Planning to apply for an instant loan? Getting a loan has become fairly easy thanks to the technological advancements and changes taking place in the financial industry. Gone are the days when banks took weeks and months to process loan applications. Today, loans are offered online, and you can apply for one with just a click of the mouse! These paperless loans are perfect for emergencies, but they are available for a range of purposes. Because of their easy application and quick disbursal, many people now prefer instant loans over traditional personal loans. If you are one of them, make sure to take the following factors into consideration before applying for such a loan.

Needs vs. Wants

Because of the easy availability of paperless instant loans, more and more people are now opting for them. However, you should never borrow just because loans are available. Before you decide to add on to your debt burden, evaluate your needs. Do you actually need additional funds? Experts suggest that instant loans are appropriate for emergencies, and borrowing one for non-essential things would be misusing it. With instant loans, it is also easy to get into a habit of borrowing, which may push you into a debt trap. So, it is important to know when you should and should not depend on these loans.

The cost

Instant paperless loans are often more expensive than regular personal loans. These loans usually have more relaxed eligibility criteria, which means even bad credit borrowers can apply for these loans. Since most of these instant loans are unsecured, the lenders have to take on an added risk. That is why instant loans often have higher interest rates and charges than traditional personal loans. It is important that you look for alternatives and explore other options before deciding to go with instant loans.

Terms and conditions

More often than not, instant loans come with rigid terms and conditions regarding repayment of the loan. Some lenders may allow you to pay off the loan in fixed monthly installments. With a long tenure, your monthly payments may get smaller, but you may end up paying more in interest. On the other hand, you may not have the options of prepayment. In many cases, prepaying an instant loan comes with hefty penalties. That is why you would have to continue paying the EMIs until the loan term ends.

Borrowing capacity

An unsecured instant loan can reduce your borrowing capacity significantly. For example, if you are currently servicing an instant loan and paying EMIs for it, you will not be eligible for a large loan until the former is fully paid off. That means getting an instant will reduce your chances of getting another loan in the future. Even if you do get a loan, it would be a much smaller amount than what you should get.

Instant cash loans are excellent tools for generating quick funds when you need cash for managing some immediate expenses. However, these loans should be taken with caution. You need to consider the various aspects and make a well thought out decision.