As people’s spending capacity increases, many are looking for loans such as instant personal or even traditional loans. Traditional loans focus on you having a good credit history, whereas instant personal loans, as the name suggests, are quite the opposite. Both have their pros and cons. As a borrower, one must clearly understand the difference between the two types of loans and make the right decision as per their requirement. In this blog, you will learn which one is better for you.  

Speed ​​and convenience:

Instant personal loans are famous for their speed of approval, convenience of instant withdrawal, and minimal paperwork. A popular loan app will allow you to apply for an instant personal loan that transfers money to your bank account within 24 hours. This is very useful for emergency medical purposes where you might not have the capital now but are sure you will get in within a few weeks or months so you can pay off the debt fast. 

Traditional bank loans are the opposite of this, as they involve a lengthy application process that sometimes requires you to visit the bank office and complete extensive documentation. This way, they are mostly used for long-term investments like a home or education loan. 

The loan amount and loan term:

You will get an instant loan for as low as Rs 5,000 and up to Rs 1,00,000, or a little bit more. This clearly shows that instant loans are usually for smaller loans, mainly for emergencies. Accordingly, the duration in which the loan has to be repaid is also less, starting from 90 days and going up to 2 years.

A traditional loan typically involves a high amount, and hence, the loan repayment tenure is also high, going up to several years. Here, banks check the CIBIL score of the borrower before sanctioning the loan as it involves a big amount, and they want to make sure that you, as a borrower, can repay the loan on time. 

Interest rates and fees:

Since the loan amount and term are much smaller compared to a traditional loan, the interest rates are very high here. It can range anywhere between 24% to 36% as there is no credit required. On the other hand, bank loans charge a very low-interest rate, especially for someone who has a very good credit history. Similarly, the late fees on default of the payment are also significantly higher when it comes to a personal loan. Hence, it’s better not to default on any of them as it will impact your credit score and result in you not getting any loan at all in the future for several years. 

Eligibility requirements:

Quick personal loans often have more lenient terms than traditional bank loans. For example, a popular personal loan app requires a minimum monthly salary of Rs. 12,000 and an age between 22 and 59. Traditional bank loans may have stricter criteria, including a higher minimum wage requirement and a good credit rating.

Impact on Credit Score:

Both payday personal loans and traditional bank loans can affect your credit score. However, not repaying a personal loan right away can have a more immediate effect, as the repayment period for these loans is often shorter. On the other hand, paying back a traditional bank loan on time can positively affect your credit score over time.

Choosing between an Instant personal loan and a traditional bank loan depends on your financial needs, repayment capacity, and creditworthiness. Although personal Quick Loans offer speed and convenience, traditional bank loans can charge lower interest rates and larger loan amounts. So select something that best suits your financial situation is good because you can pay later while sticking to your deadline.