What Is the Difference Between Instant and Normal Personal Loans?

08 Aug 2020 5 min read
Personal Loan: What Is the Difference Between Instant and Normal Personal Loans? - Afinoz

You can get an instant loan even you have a bad credit score; not many documents are required, but they are costly as compared to normal personal loans. We are sure that you have heard similar arguments many times but none of them is true. Instant loans, usually, are recognized as app-based lending while normal personal loans are considered as borrowing from traditional lenders such as banks and NBFCs. But do you know that there is not much difference between a normal and instant personal loan? In fact, instant personal loans are an evolved version of the normal personal loans.

Though, there is a fine line between a normal and instant personal loan that separates two loan products from each other. To know how they differ with each other, take a look a look at the...

Comparison between a Normal and Instant Personal Loan.

Credit Profile  

You can't get a normal personal loan unless you haven't taken it previously. Why? Nil credit history. A traditional lender gives too much stress on the credit history which only builds when you borrow. It means No Loan - No Credit History. It is cyclical. Instant personal loan, in contrast to a normal personal loan, has no such restrictions. Whether you have a nil credit history, receiving cash salary, or the first time borrower, you can get an instant personal loan. Because, instant loan lenders do not rely on credit score, a three-digit number projected by the credit bureaus, solely. Instead, they have their own credit risk assessment mechanism which is far advanced than that of the banks and NBFCs. However, one thing is common between the two: you shouldn't be a defaulter of any financial institution to get any kind of loan.

Loan for Unplanned Expenses

Be it a wedding, home renovation, and travel - it takes planning and budgeting. 15-30 days, at least, are sufficient to come with an exact requirement. Since it involves so much time, people don't bother to wait another 3-5 days to get the desired funds through normal personal loans. But what about expenses you can't plan for? Suppose, your smartphone gets damaged, or your favourite smartphone is for online sale for a limited time with a fascinating deal - would you let it slip through your hands? No. Why? Because you need that. Understand with this another example: someone in your family met with a horrific accident; the situation is critical; the patient needs admission, and you have to arrange an admission fee. Now, you can't wait too long. You have to arrange quick finances, but how? With instant personal loan. In simple words, normal personal works well for planned expenses but instant loans don't let you down even in the testing times. Be it replacing your older smartphone or arranging quick funds for a medical emergency they always prove helpful.

Quantum of the Loan

As compared to instant loans, personal loans give you access to a bigger amount. Most banks can lend a sum of Rs 25-30 lakh easily. In the first instance, it looks like the solution for every need. But let’s get real: Does everybody needs that much amount? People these days, tend to borrow the exact amount they require to meet the particular need. It's a common-sense that to purchase a smartphone worth Rs 30000 or even low, you don't need to borrow lakhs. More borrowing means more you pay as interest. Instant loans, thus, give you the flexibility to borrow the amount you exactly need: neither more nor less.

Processing Time

A normal personal loan requires scrutiny. Bank officials check your credit profile, evaluate your income, and eligibility criteria. All this takes serious time. Well, it's understood if you need a bigger amount but what about when you need a few thousands or lakhs? Is it fair to wait 3-5 days to buy your favourite gadget, which only needs Rs 40-50 thousand? No. But you have to go through with the process unless you switch to an advanced process - with minimum human intervention- instant personal loan application. It would be quite fair to say, a normal personal loan application process is like watching a 5-day test match against a 20-over game for an instant loan. Some users, in fact, have admitted that sometimes it (Instant loan: from application to disbursal) only takes a few minutes, which is like watching highlights.

Interest rate 

“Instant loans are disbursed at higher interest rate" a random bank official, usually, uses this as a concrete statement against the instant personal loan. To a greater extent, though, it is false. Why? Take a look at the calculation below and tell: what do you think about it?

Instant loan

Personal loan from bank or NBFC

Principal loan amount

50,000

Principal loan amount

50,000

Interest rate

2% per month

Interest rate

14% per annum

Tenure (min)

6 months

Tenure(min)

12 months

Total repayment

51,557

Total repayment

53,872

This comparison clearly shows that for a small amount, instant loans are cheaper as compared to a normal loan.

Security

Have someone ever called you regarding a loan, multiple times, to an extent when you had to yell at the guy? Well if not then you are blessed that you haven't applied for a normal personal loan yet. Some impostors, in fact, steal your personal information when you submit physical documents at the lender's place and sell it to fake agencies. It happens due to the human intervention but if you process your personal loan application through a robust platform, which incorporates various layers of security, the chances of trickery reduce and you receive only those calls, messages, and emails that you want. In simple words, instant loan protects you against any privacy threat while normal personal loans don't.

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