Personal loan: 4 dos and don’ts of securing an instant loan; check details here | Mint

In case you face some financial difficulty, or have a sudden expenditure lined up, you could – among other things – raise a personal loan from a bank or a non-banking financial corporation (NBFC).

Banks, typically, have a well laid-out process of applying for, and disbursing the personal loan. However, there are a number of ways to give out instant personal loans as well. In fact, a number of financial institutions have a provision of offering instant personal loans to the borrowers.

There are two kinds of instant personal loans:

I. Offered on credit card: Usually your bank may offer you an instant loan on the credit card. This instant loan usually comes with a number of benefits. First and foremost, you don’t need to submit any documents, and you can simply apply online for this.

There is no KYC (Know Your Customer) process required for this insta loan since your bank already has access to all the documents including your PAN, ID proof, bank statement and income proof.

II. Available on fintech platforms: There are a number of other fintech platforms also which offer insta loan to borrowers without any major human intervention. They ask you to simply upload all the key documents on the system, and through aadhaar authentication — they can check your identity, and check your credit score before deciding to disburse the loan amount.

It is noteworthy that these loans are of smaller value and typically offered by the digital lending outlets. Most commercial banks, meanwhile, tend to exercise caution before they disburse large amounts of loan to the borrowers.

Before you decide to opt for an instant personal loan, you should take the necessary steps.

These are some dos and don’ts of instant personal loan:

Dos of instant personal loan:

1. Lender’s reputation: Make sure you take instant personal loan from a reputable company and not from a completely obscure financial institution.

2. Registered NBFC: If you are borrowing from a large or mid-sized commercial bank, it is recommended but even if you opt for a non-banking financial company (NBFC), it is fine so long as it is a registered NBFC. You can access the list of RBI registered NBFCs here.

3. Processing fee: There should not be a high processing fee. In the name of instant loan, you should not end up accepting a high processing fee.

4. Interest rate: The rate of interest should be comparable to that of a regular personal loan. Remember that a small difference in the interest rate can cost you dearly in the long run.

Don’ts of instant personal loan

1. Web vs app: Some of the app-based fintech platforms have minimal web-based applications. The app-based platforms seek a host of permissions, thus invading your privacy.

As much as possible, you should rely on the digital lending platforms that have a significant web-based presence as well. A mobile application is good as an add-on but it should not be a compulsion.

2.  experimental: Whenever you have a choice between your bank and an untested lender, you should opt for the former, and refrain from choosing a new one.

A new lender may levy hidden charges before loan approval and importantly, its customer support may turn out to be abominable.

3. Loan against credit card: It’s always tempting to take a loan against credit card but one should factor in the GST levied on its interest unlike other personal loans which do not attract this tax.

So, any calculation that you make before accepting a personal loan against the credit card should be done with this in mind.

4. Unregistered NBFCs: As mentioned above, one should exercise extra caution before opting for a non-banking financial institution. It is not advisable to opt for an obscure fintech platform which does not have any clear partnership with a bank or a registered NBFC.