Instant personal loans: Are they worth the speed? A deep dive into the pros and cons

Instant personal loans have become a popular choice for people as these loans offer quick disbursement and require minimal documentation for application processing. However, these loans come with its own pros and cons which you must evaluate before you decide on applying for such loans.

Pros of instant personal loans

1. Quick disbursal and approval

• Most instant personal loans are processed within a few hours or even immediately.
• The process is seamless, thanks to online applications that take less time than the conventional loans.

2. Minimal documentation

• Most of the lenders only require basic documents such as identity proof, address proof, and income statements to process your loan application.
• Digital verification makes it a hassle free experience and reduces paperwork which as a result saves you a lot of precious time.

3. No collateral required

• The loans are unsecured, which means that you do not have to put any assets as security.
• These loans are most accessible to the ones who do not own high net worth assets but are salaried professionals or self employed with a stable income.

4. Flexible usage

• Unlike other loans, you can use instant personal loans for personal purposes like medical emergencies, travel, education and even for debt consolidation.
• The funds are in your own hands and you can use them how you want for your personal use.

5. Available for low credit score borrowers

• If you have a low credit score, there are some lenders that still approve instant personal loans.
• This is a good option for people who don’t meet the criteria for traditional loans from banks.

Cons of instant personal loans

1. High interest rates

• Usually , the interest rates on instant personal loans are higher than what you will get on other loans in the market.
• The convenience and quick processing result in increased borrowing costs.

2. Short repayment tenure

• These loans have shorter repayment tenures which may need you to pay back the loan within a few months or a few years.
• This may increase the possibility of higher EMIs and financial pressure.

3. Processing fees and hidden charges

• High processing fees are charged by a lot of lenders. This can result in a rise in the cost of borrowing.
• You might have to pay some other hidden charges over the EMI of the loan, which means that the loan will become more expensive and may add burden to your finances.

4. Risk of debt cycle

• The easy availability of funds can tempt you to have multiple loans and then get trapped into a debt trap.
• Defaults in payments will hurt your credit score if you fail to manage your loan repayments. This will lower your chances of future borrowings.

5. Limited loan amounts

• The loan limit offered in instant personal loans is much lower than regular personal loans.
• If you want more funds, then an instant personal loan might not be a good option for you.

In conclusion, instant personal loans are a rather effective type of credit that may be helpful in different situations, especially if you need money urgently. However, they may attract high-interest rates, shorter loan tenures and hidden costs. It is important for you to consider your financial requirements, repayment ability, and the loan tenure before applying for an instant personal loan.

(Note: Raising a loan comes with its own risks. So, due caution is advised)