Personal loan: A beginner’s guide to get an instant loan | Mint

A personal loan is an unsecured loan given to meet immediate financial needs of people. Lately, it is quite common for banks to offer instant loans in this category. These instant loans are given to meet urgent financial assistance. There could be a number of reasons for which an instant personal loan is applied. This could include a wedding, vacation, buying a luxury item and a personal emergency.

A. Wedding: There is a wedding in the family and you are falling short of some money. So, you plan to meet the shortfall by raising a personal loan.

B. To go on a vacation: You plan to go on a vacation and are falling short of money. Raising an instant loan is an easy and convenient way to fulfil your financial requirement.

C. To buy a luxury: You are contemplating buying a luxury item and are short of funds as of now. So, the only way to buy the luxury item is by raising a personal loan.

D. Personal emergency: You are facing a personal emergency and are short of funds currently. An instant loan can come handy in this case.

They are unsecured loans and have following five characteristics:

1. documentation: Instant loan is given by the bank when you share a long relationship with the bank and by virtue of this relationship, they have all the necessary documents that are required to approve a loan, for instance, income proof, proof of employment and credit score.

2. Quick approvals: By definition of instant loans, these loans are given instant approvals. So, the moment the form is submitted, the money is transferred to the bank account.

3. High interest rates: Personal loans usually carry high interest rates. Typically, all unsecured loans carry a higher rate of interest. The loans which are secured i.e., need collateral have a lower rate of interest.

4. Tenure: The loan tenure is usually small. Unlike a car or house loan, the tenure of an instant loan is short — sometimes as short as a few months and as long as 2-3 years. These loans are known for the convenience they offer. They are essentially meant to meet short term needs of consumers, for instance to go on a vacation or to meet some financial emergency.

5. Flexible loan amounts: The loan amount is quite flexible. This means the loan can be given as a credit line and one can use the loan as and when the need arises. And the interest is levied only on the amount borrowed, i.e., the portion of the credit line that is exhausted.

6. Online process: The process of loan application is completely online. This means an applicant has to submit the form online and the amount of loan is disbursed instantly.

Eligibility criteria:

For instant loans, eligibility criteria varies from person to person. but typically the criteria includes:

1. Age criteria: The age criteria should be anywhere between 21 to 60 i.e., the applicant should be in the age bracket of a working professional.

2. Monthly income: The monthly income should be somewhere around ₹25,000 per month.

3. Credit score: The applicant should have a good credit score. An instant loan is given to the applicants with a high credit score i.e., 720 and above.

Documents required

As mentioned above, the instant loan doesn’t require any physical documents to be submitted. A personal loan typically requires the applicant to submit three months’ salary slips, ID card given by employer, PAN, aadhaar and form 26AS of past two years. However, instant loan doesn’t require any of these documents to be submitted.

To sum up, an instant loan is a subcategory of personal loan, which is an unsecured loan given by banks or financial institutions to consumers to meet an array of financial needs such as a medical emergency, buying a luxury item, going on a vacation and renovation of home, among others.