Secured and unsecured loans are the two types of loans available in India. Secured loans are those that are guaranteed by collateral or security in the form of assets such as property, gold, investment accounts, and so on. Unsecured loans occur when a bank or NBFC accepts to provide loans without collateral and solely based on a borrower’s CIBIL score and other financial track records.
Applying for a loan is easier than it seems. However, before applying for one, you must be notified of your financial status, as you would be required to repay the loan amount with the applicable interest rate and within the selected tenure. With all the documentation and eligibility requirements, you must initially determine your necessity. If you believe this is the best option for you, you can either go to a bank or NBFC physically or apply online for a loan respectively.
In this article, we are going to discuss the best possible ways to get a loan instantly in India, which you must need to consider for your personal finance.
Facts to Consider Before Applying for a Personal Loan in India
Getting a loan is a significant financial commitment that necessitates careful consideration. Here are a few instances:
Rate of interest (ROI): The interest rate is the first aspect you should think about when taking out a Personal Loan. From your perspective, the best Personal Loans are those with the cheapest rates. Going to a reputable bank is your best option; your local neighbourhood lending institution will charge you the best. There are vast variations in interest rates between banks. As a result, it’s a decent practice to browse around and evaluate the interest rates provided by various banks. This can be done quickly and effortlessly online. That being said, keep in mind that banks give varying rates to different customers based on considerations such as income source, credit score, age, type of borrower, and so on.
No Need for Collateral: Personal loans are widely accepted as unsecured ones which means that you are not required to hold any collateral as security for your loan. Secured Loans, in which you vow assets, maybe a better alternative because the interest rates are likely to be less. You now won’t have to be concerned about your credit score. If that isn’t an alternative, Personal Loans are a great alternative.
Minimum Documentation: The finest personal loans may be the ones that require the least amount of effort. When you need money quickly, for sure, the only problem you want to do is submit a bunch of paperwork and fill out a bunch of forms. You can now apply for a loan online from the comfort of your residence by visiting the official portal of your bank.
Tenure: Among the most important factors to consider is the loan’s term, which typically ranges from 12 to 60 months. Unless you need a loan for a few months or several years, the best loan for you is one that fits your tight deadlines. The equated monthly instalments (EMI) you pay is determined by the loan’s term. Longer terms result in lower EMIs but higher interest charges. Thus, it is well suggested to go for a bank or NBFC that provides you with a flexible loan tenure.
Processing Fees: The overall value of the loan is determined by the interest rate and the processing fee. Before making a decision, you should think about both factors. Low processing fees with any bank will help you pay off your loan faster.
Credit Score: You should review your credit history before applying for a loan. Credit history is data of any past debts you’ve taken out and how well you’ve paid them back. A credit score of 750 or higher is required to apply for a loan in India.
The Best Possible Ways to Get a Loan in India
Although it is recommended that you have standby finance in case of a financial emergency, few folks genuinely do. Taking out a loan is the only way out of this predicament. Here are some possibilities for getting a fast loan in a crisis.
Take a Loan from Your Employer
Your employer may offer you an interest-free or low-interest loan. For instance, you would be obliged to pay only the principal amount you took from your employer and not incur any interest on the loan, or you might be asked to pay subsidized interest. An employee’s interest-free or loan is subject to taxation.
Apply for a Loan Against a Credit Card
A personal loan is a loan secured by a credit card. You can easily apply for an instant loan against your credit card if you have one. A credit card loan does not require paperwork, unlike a personal loan. A few documents are usually required to prove your eligibility for a personal loan.
A credit card loan, similar to same-day cash lending, is an unsecured loan. We often mix up the terms “credit card loan” and “credit card cash withdrawal.” We generally believe that by taking out a loan against a credit card, the bank will raise the credit limit on the card and allow cash withdrawals. It is, moreover, a fallacy. Banks may give you a loan based on your current credit card. The best choice for those who need instant cash to grapple with immediate and unforeseen personal circumstances is to take out a loan against a credit card.
When your credit card’s cash withdrawal limit is insufficient to meet your financial needs, you can go for such loans. Furthermore, cash withdrawals made with your credit card incur higher interest rates. Banks, on the other hand, incur lower interest rates on credit card loans. Besides, the loan is disbursed promptly and without the need for any documents.
The loan amount is given to you in the form of a demand draft or a direct deposit into your existing savings account. The interest rate on a credit card loan varies depending on the type of card you hold and your credit history. As a result, keeping a good credit history is crucial because banks regard your credit history when determining an interest rate on your loan.
Apply for a Top-up Loan
Customers with an ongoing relationship with the lending institution, a satisfactory credit rating, and repayment capacity are eligible for the top-up loan. A top-up loan is considered a personal loan and can be used for a myriad of purposes, including home furnishing, financing children’s education costs, and other unforeseen circumstances. Because the lender has already determined the borrower’s creditworthiness, obtaining a top-up loan is simple and fast.
In most instances, you will not be required to submit relevant documentation for approval. Top-up loans are granted on the same terms and at the same interest rate as the existing loan. That being said, based on your relationship with your lender, your eligibility, and your lender’s set of policies, the lender may consent to a different interest rate or tenure, or revoke certain charges in some instances. The top-up loan’s tenor is determined by the existing loan’s tenor.
Apply for a Loan Against Fixed Deposit
Individuals pursue loans from a myriad of perspectives to satisfy their requirements in the event of a financial crisis, such as medical costs, weddings, education costs, and so on. Considering the same a loan against a fixed deposit is a secured loan that allows you to use your deposit as collateral in exchange for a loan. You can be eligible for a loan of up to 90% of your deposit.
Anyone with a deposit account, regardless of income, occupation, or credit score, can apply for a loan against their FD. But it is important to remember here is that a loan against fixed deposits cannot be taken out in the name of a minor, and investors in 5-year tax-saving FDs are not eligible to apply for a loan against their FD. Loan against FD can be taken out by both salaried and self-employed individuals. To qualify for this loan, you do not need to have a good credit history. Once you apply, the money will be credited to your account within a matter of hours.
When compared to other unsecured loans, such as personal loans, loans against fixed deposits bear cheaper interest rates. One of the most appealing features of this type of loan is that there are no loan processing fees. However, the only disadvantage of a loan against a fixed deposit is that if a borrower is unable to repay the loan the bank has the authority to foreclose the fixed deposit in order to recover the loaned amount, and the term of the loan cannot surpass the fixed deposit’s residual tenure.
Apply for a Pre-Approved Personal Loan
A pre-approved loan is a type of personal loan that banks provide to existing customers based on their debt record and current account balance. Customers with good credit who have reimbursed previous loans on period are eligible for these instant loans, which are provided by banks or non-banking financial institutions. Banks provide pre-approved loans with a predetermined loan amount and period with no requirement for documents and collateral.
Existing customers can get pre-approved loans from banks by evaluating their credit score and reimbursement ability. As a result, they offer loans at a competitive interest rate that is lower than the standard rate of interest on personal loans. There are no restrictions on how you can use the loan amount, just like with personal loans, and you can use it for whatever you want, including travel, weddings, and health costs.
Pre-approved personal loans have a faster approval and disbursement process than standard personal loans. SBI, HDFC, Axis, and ICICI banks, on the other hand, have the quickest loan approval processes and would accept you within a day if you are an existing customer.