Instant loans provide quick access to cash with minimal documentation requirements. But they come with myths and risks. Learn how to borrow safely, avoid debt traps, and choose RBI-approved lenders.
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In this digital era, instant loans have become very popular. It helps you get immediate cash with minimum paperwork. Moreover, these loans are processed digitally. Hence, there is no need for a physical visit to the branch.
However, there are certain myths and risks associated with these loans. In this blog, we will study certain myths and risks about instant loans.
Instant loans are one type of personal loans which are generally offered through mobile apps and fintech platforms. These loans are approved and disbursed very quickly. At times it's even disbursed within a few minutes. They are mainly designed to offer short-term credit for urgent needs like medical bills, travel emergencies, or sudden needs.
There are certain misconceptions about instant loans. Let’s differentiate instant loans myths from reality.
This is not at all true. In fact, instant loans cater to people of all income groups. These loans check borrowers’ spending behaviour, digital transactions and repayment history instead of focusing only on salary. Due to this, salaried employees, as well as freelancers and even self-employed individuals, are able to access instant loans.
There is a common misconception among many individuals that instant loans have high interest rates. But in reality, instant loan interest rates are quite competitive and often customised. Hence, before opting for a loan, you can research a bit about various lenders. This will help you in getting affordable options.
Many borrowers who have low or average credit scores feel instant loans are only for people with good credit, and they will be rejected for this. But in reality, instant loans are also available to people with average credit. Hence, if you don’t consider this option, then you may miss out on access to financial assistance.
Yes, instant loans are quite useful for emergencies, but that doesn’t mean they are limited to that only. People nowadays are using instant loans for various purposes like education, travel, weddings, home renovation, or even consolidating multiple small debts into one.
Many borrowers feel that digital platforms are inherently insecure. Some unregulated apps are quite dangerous, but reputable lenders use strong encryption and follow regulatory norms. Hence, you shall always borrow from a trusted source that is RBI-approved.
Instant loans are quite convenient and beneficial to borrowers. But it also carries a lot of risks, which are as follows: -
There are certain loan apps that are not overseen by the RBI or any other legitimate financial regulator. These platforms are quite unsafe and can have hidden charges, mislead borrowers or even misuse your data.
Hence, before opting for an instant loan, do check if the borrower is RBI-registered. Only rely on genuine registered lenders.
The easy availability of these loans might lead you to excessive borrowing. This can make you fall into a debt trap. You may take multiple loans and later find it difficult to manage.
Hence, you shall be very careful and borrow only when you have an actual need. You can create a proper budget and stick to it to avoid falling into a debt trap.
Genuine instant loans, too, can have higher interest rates than personal loans. Additional charges like processing fees, late payment fees or prepayment charges can impact your borrowing cost. Hence, do check this before opting for a loan.
Unauthorised platforms may burden you with extra charges in the name of hidden fees. They may levy undisclosed charges, which can increase your loan burden.
Instant loans can benefit you if you use them wisely. Here are some practical borrowing tips to help you borrow wisely: -
As these loans are easily available, it doesn’t mean you just have to keep on borrowing. Borrow only when the actual need arises. Unnecessary debt will increase your burden.
Different lenders have different interest rates. Hence, compare the interest rate offers of different lenders and choose the loan that gives you the best deal. Don’t be in a hurry to go with the first offer.
Only borrow from lenders that are regulated by the RBI or backed by banks or NBFCs. Don’t borrow from platforms or apps that lack transparent credentials or have limited contact information.
Be clear about your repayment plans. If you make any defaults in repayments, then you will have to pay penalty charges. Moreover, your credit score will also be affected.
Instant loans have changed the way people borrow money. These loans are offered with speed and convenience and require minimal documentation. It is very useful, especially during urgent needs. But still, these loans are misinterpreted due to common myths. At the same time, they also carry certain risks which borrowers can’t ignore.
Unregulated lenders, high interest rates and hidden charges can lead to financial stress. Hence, one shall always be careful and responsible while borrowing. One shall assess the lender's credibility, compare loan offers and read the loan document carefully. Making an informed decision is the best way to be financially safe.