An instant personal loan is an unsecured loan type you can use for various personal expenses like going on a vacation, conducting a major home repair, consolidating debt, getting medical treatment, or paying for higher education. Unsecured means you do not have to provide collateral, security deposit, or guarantor against the loan amount. Several financial institutions make these loans available through their apps. You can apply for one from the comfort of your home using an instant loan app. Let's learn more about these loans and how they help cover costs without hassle.
How does a personal loan work?
When you apply for a personal loan online, the lending institution evaluates your eligibility and credibility based on your income, DTI ratio, credit history, and repayment capacity. If you fulfil their eligibility and documentation requirements, they offer you a loan with a suitable amount, interest rate, and repayment term. Once the lender approves your loan, they disburse the approved amount directly into your bank account. You can use this amount for any intended purpose.
The repayment period starts immediately, and you must pay one EMI each month to pay off the loan during the loan term. Timely repayments will help build a good credit score, enabling you to apply for more loans in the future and get quick approvals.
Factors affecting personal loan interest rates
Lending institutions typically determine interest rates based on your income, DTI ratio, credit score, and exceptional underwriting standards. Generally, you qualify for a lower interest rate if your credit score and income are high, and the debt-to-income (DTI) ratio is below 40%. You may get the best interest rates if your credit score exceeds 700. You must also fulfil the lender's minimum income requirement to get a cheaper APR. Moreover, your payment history should be consistent, and your financial obligations should be limited to create a dependable financial profile.
Common expenses to cover with an instant personal loan
Personal loans are flexible and diverse funding options you can use for various purposes. Some common ways to use Personal Loans include the following:
- Debt consolidation: Consolidating high-interest and old debts with a low-interest personal loan can save money, especially if the processing and prepayment charges are negligible.
- Medical bills: You might need money to cover bills for a medical emergency, treatment, surgery, or elective procedure. A personal loan may provide the necessary funds to handle medical costs without breaking your budget.
- Home repair and renovation: You can easily borrow a personal loan instantly through a loan app to cover the cost of your home remodelling, improvement, repair, and renovation projects. You can cover all expenses related to your home renovation, including shipping, labour, material, designing, contractors, etc.
- Wedding expenses: Usually, people spend a large part of their life’s savings on their wedding. You don't need to do that. You can borrow a personal loan for a wedding, handle your wedding expenses, and repay the amount in easy instalments.
- Vacation costs: Travelling to a foreign land can be costly, especially if you are going on a family vacation and covering all the expenses. If your savings are insufficient, you can consider taking a personal loan for travel to cover the costs.
- Higher education: Personal loan is the best funding option to finance higher education, as they have competitive interest rates and no end-use restrictions. Moreover, they do not require collateral or a down payment to cover the costs.
- Big-ticket purchases: If you don't have enough cash to buy the latest phone, computer, or laptop, an instant personal loan can help you purchase and pay its price in easy instalments.
Features that make personal loans better than other funding options
Let’s look at a few features and benefits that make personal loans the better funding option than others:
- No restrictions on end use: No limitation on the end-use is one of the biggest benefits of borrowing a personal loan. You can use the loan amount for any planned or unplanned expense and pay its cost in EMIs.
- Quick Disbursal: If you have a good credit score and meet the lender's eligibility and documentation requirements, you can get instant approval and quick disbursal. This feature makes personal loans the best funding option for emergencies.
- No Collateral Requirement: Since personal loans are unsecured, you don't need to arrange any collateral, guarantor, or security to obtain them.
- Flexible Tenure: personal loan tenures go up to five years. You are free to choose a term with EMIs that suits your monthly budget the best. Longer tenure reduces the EMI amount, while shorter tenure increases it. Therefore, use an EMI calculator to calculate EMIs and decide on tenure with budget-friendly EMIs.
- Competitive Interest Rates: Personal loans have competitive interest rates. So, the monthly instalments remain easily affordable.
How to apply for a personal loan?
Are you ready to apply for an instant personal loan? Follow these steps to obtain one:
- Check your credit score and ensure it fulfils the lender’s minimum requirement. If it is low, identify and dispute errors in your credit report and take steps to improve it before applying.
- If you are currently handling several loans, pay them off to reduce your DTI ratio and get a better loan plan with affordable EMIs.
- Once you bring your finances in order, apply for a loan by downloading an instant loan app and filling out an online application form.
- You must provide KYC details to complete your loan application, besides identity, income, and address proof.
- Select loan amount and EMI and provide your bank details.
- After checking your details and documents, the lender will approve your personal loan application.
- Once approved, you will get the loan amount in your account instantly.
Whether it is a planned expense or an emergency, an instant personal loan can be a handy financing option for you. You can get the money whenever you want without impacting your savings. Simply apply for it from the comfort of your home using an instant loan app and cover your financial need without the hassle.
