People often think that taking an instant loan to realise your personal goals is a bad idea. But, if you plan it out, you can actually benefit from it more than you think. It all boils down to how well you can manage it to make the most out of it. Usually, an instant loan makes sense when you are in need of cash immediately. But, it can also mean that you plan out your expenses and take an instant loan according to your needs. The basic advantage of such a loan is the fact that they are disbursed almost instantly to your bank account.
However, there are a few questions that you should definitely ask yourself before you apply for an instant loan.
Question #1: Do I Need It?
What is it that you wish to accomplish by taking this loan? Is it important to you? Applying for an instant loan doesn’t take a long time these days thanks to fintech firms and the technology they have at their disposal.
The more crucial question is why do you need it. If you have a medical emergency and you are strapped for cash, then definitely you should go for it. If you are yearning for a holiday and want to see the world, we don’t blame you for wanting a loan. The answer to this question lies in the importance of your goal. If you are doing it just because your friends are doing it, then maybe you should rethink. If this loan has a definite purpose in your life, only then should you consider taking it.
Question #2: Is My Credit Score Enough To Apply For a Loan?
Your CIBIL score plays an important role when it comes to borrowing money. Your credit score or CIBIL represents how creditworthy you are. Instead of applying for a loan and getting rejected, it is better that you check your credit score first.
If you are a first-time borrower, then chances are you will not have a credit score. But, there’s no need to worry as most fintech lenders welcome first-time borrowers to apply.
Question #3: How Much Do I Need to Borrow?
It is not always possible for you to figure out how much you should borrow. But, having a plan in place always helps because it allows to figure out how much money you will require as an instant loan. There is simply no need to apply for a bigger loan and get rejected when you can apply for a small one and still get your needs met.
In fact, it would be wise to research a bit on your own and see what different fintech firms have to offer. Some firms offer a lot in terms of flexibility. Even if you qualify for a bigger amount and don’t need it at the end of the day, you will not have to pay any interest on it. You will only pay interest on the amount that you ultimately choose to use. This brings us to the next question.
Question #4: How Much is the Rate of Interest and Can I Afford it?
Always make sure that when you are taking an instant loan, you can pay it back within the agreed schedule. You need to repay the borrowed amount along with the interest over time. Different lenders charge differently. It is up to you to figure out which lender suits your needs. Going for the least rate of interest is one way of seeing this. But, you might not have much flexibility when it comes to repayment options.
It all depends on your own needs and how much you can afford. If you can afford a year-long repayment plan where the interest rate might be slightly higher, you have to choose that over a lender who is offering very low interest but a short-term repayment plan. So, you have to compare and see which one will benefit you the most. There are simply no benefits if you take an instant loan and fail to repay it on time. It will affect your credit score as well as create a debt trap.
Question #5: What Can a Lender Hide From Me?
Some lenders hit you with hidden charges and processing fees once your loan has been approved. Opt for a lender who has all the charges revealed upfront. This will ensure that you are dealing with an honest lender who is willing to be as transparent as possible.
Sometimes people often choose to repay their entire loan amount back. Usually, this happens when people receive a lump sum from other sources and wish to cut back on their debt. However, some lenders might charge you with a prepayment penalty. Make sure to ask these questions before you apply for a loan.
Instant Loans: Take it or Leave it?
Debt is a financial tool these days. It helps you meet your financial goals and allows you to build a positive credit score amidst other things. An instant loan is certainly a good idea only when you are sure you want it. If it helps your cause and improves your life then consider taking one when you can afford it.