Difference between Instant and Normal Personal Loan

Many people think that instant personal loan can be availed by those people also who have bad credit scores, while the normal personal loan requires a good credit score. It is this privilege of being able to avail personal loan even at low credit score makes instant personal loan costly and requires lesser documents. However, this is not a true story. 

When you are availing a personal loan from a mobile-based app that is recognised as instant loans, whereas when you are borrowing from traditional lenders such as banks or NBFCs, then it is considered as a normal personal loan. Thus there is not much a difference between the two. In fact, you can say that instant personal loans are the evolved version of regular personal loans. There is a fine line of difference between the two for which we would take a closer look. 

Comparison between Instant and Normal Personal Loan

1. Quantum: The amount of loan you can avail through normal personal loan goes as high as Rs. 50 lakhs or more. However, most bank’s maximum loan quantum is easily Rs. 25-30 lakhs. On the other hand, instant loans give a maximum loan amount around Rs. 5-10 lakhs. In reality, you need to borrow only that much amount as much as you need. Most times, people need a low amount of loan to buy something for which you need not avail a big loan but a quick loan of the right amount. It is here that instant loans come to the rescue.
2. Security: You might have received some unsolicited calls sometime about whether you want to avail a loan or not. Sometimes these calls get too frequent too that it disturbs your entire day. In case of a normal personal loan there is human intervention, and your documents into the wrong hands can cause you serious monetary and other damages. However, when you apply for the loan through a robust platform that involves multiple layers of security, the chances of fraud, leakage of information, unwanted emails/calls/SMS becomes almost nil. In a nutshell, the instant loan system protects your data and privacy.
3. Loan for Unplanned Expense: When you are looking to finance planned expenses like wedding, travel, etc., the additional wait of 5-7 days to get the desired funds do not matter much and normal personal loan provides the right solution. But, in the case of unplanned expenses like the latest smartphone deal for a limited period has arrived and you want to buy it. In such a case instant funds would be required. An instant personal loan makes sure you get the funds instantly whenever you need.
4. Credit History: Traditional lenders lay too much emphasis on credit history. Thus, you can avail normal personal loan only when you have taken some credit before. On the other hand, the instant personal loan apps do not rely on credit score, they advance loans even if you have no credit history, or you get your salary in cash.
5. Processing Time: Normal personal loan requires scrutiny of information provided by the applicant, which takes about 3-4 days resulting in the processing time of about a week. This wait time is understood when you need a bigger amount. However, when you need a small loan of some thousand rupees, then an instant personal loan is a better option.
6. Interest Rate: Many normal personal loan sellers say that instant personal loans are provided at a high-interest rate. However, it is not true. The interest rate on an instant personal loan is shown as a monthly rate which ranges between 1.5% to 2.5%. If you calculate the yearly rate on this basis, then you will find that it is very much in the range of interest rate charged by a normal personal loan. 

Thus, make sure to assess your requirement and the features of both normal and instant personal loan before deciding to choose one. At different points of time, different types of personal loan would be suitable. Thus, each time you need to treat the situation as brand new and not take too much inspiration from what you did in the past. 

Read more: 4 ways to increase Credit Card Limit

Summary

An instant personal loan is not just for those with a bad credit score. In fact, both normal personal loan and instant personal loan are very similar; there is just a fine line of difference between the two. The key points of comparison between normal and instant personal loan are: 

1. In case of instant personal loan, your application goes through a robust system involving multiple layers of security which reduces the chances of fraud and data leakage. Whereas, in case of normal personal loan due to human interference, security can be compromised at any level. 
2. Since normal personal loan takes almost a week to get disbursed it is best for planned expenses like wedding, travelling, etc. However, for unplanned expenses when the funds are required instantly, the instant personal loan is a better option. 
3. An instant personal loan does not have a high loan quantum limit. Whereas for a normal personal loan, you can avail up to Rs. 30-50 lakhs if you have the repayment capacity. 
4. The rate of interest for an instant personal loan is not high. The only difference is that for normal personal loan rate is charged on an annual basis, but for an instant personal loan, the rate is charged monthly. 
5. To avail the regular personal loan, you need to have a credit history as traditional lenders consider this to be an extremely important factor. However, in case of instant personal loan, having a credit history is not mandatory.