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Applying For an Instant Loan? Here's What You Should Know It is extremely important to know the full cost of the loan, and understand the terms and conditions that come with it

By Abhishek Soni

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Availing a loan is something that has evolved greatly over the years, particularly with the advent of technology. Today, customers no longer need to wait in long queues or go through unimaginable amounts of paperwork to avail a loan. Technology and the rise of fintech brands have paved the way for loans to be sanctioned almost instantly. However, it is still an aspect that can't be taken lightly. Negligence in availing a loan can result in landing us in a tight spot. For instance, it is extremely important to know the full cost of the loan and understand the terms and conditions that come with it.

The list of things to crosscheck entails ROI, processing fee, and other miscellaneous fees such as legal and documentation charges. To that end, you should know that all lenders are required by the Reserve Bank of India (RBI) to produce explicit disclosure on their borrowing cost otherwise called annual percentage rate (APR). As such, if a lender is not providing this standard disclosure, it is your cue to not avail a loan from the same. Having said that, let's take a look at some key points to bear in mind when applying for an instant loan.

Lookout for compliance red flags

Here, the question of registration becomes quite relevant. As mentioned earlier, with the advent of the Internet and the digital era, things are no longer what they used to be in the past. You can avail loans on smartphone interface services for which you would traditionally approach a brick-and-mortar service point. Today, we have app-based online loans and while this is remarkable progress, it also calls for your full caution.

Now, it's important to make it a point to verify that the entity you are borrowing from is an RBI-registered lender, be it a bank or an NBFC. Without this precautionary procedure, there is no safeguarding of your rights as a borrower against the lender who might resort to shady and unscrupulous money-lending practices.

Also, be a savvy consumer if the lender asks for any sensitive PII without clear disclosure. A lot of online lenders do request sensitive PII such as SMS, contact, and call logs among others via android apps. In such a case, request the lender for clarification with regards to how they are going to utilize this customer information and see to it that there is no scope for misuse of the same. At the same time, this is no reason for you to be wary about the procedure as the PII so obtained will be the assessment metrics for your loan approval.

Pricing check

Another safety measure from your end as a responsible customer is to critically assess the prices of loans and steer clear of unreasonably priced loans. The safest bet is to turn away from any lender which has a maximum APR more than 40 per cent. As it is typically peak that a registered lender will charge irrespective of the loan they are selling. It is also advisable to avoid microloans that have a short-term tenure of 90 days and are ticket-sized, no more than INR 20,000. The major setback of these microloans is that they come at a very steep price and given their size and tenure, can make it extremely challenging to repay them. What is even more problematic is that these microloans can have a predilection of pushing the borrower into a debt trap as it often tends to become an endless cycle of borrowing.

Loan product analysis

Doing a product analysis is always a recommended and safe way to measure the requirements against the lender's offerings. It is standard procedure for lenders to disclose their minimum-to-maximum loan amounts as well as tenures before you submit your loan application. Therefore, you must assess your borrowing capacity and fund requirement to ensure that the loan amount is well within the range of your comfort vis-a-vis repayment and fulfillment of your needs.

Opting for seamless and convenient processes

In the meantime, it would also be wise to give preference to lenders with minimal documentation requirements. Typically, all that is required is KYC verification besides the individual meeting the eligibility criteria. With regards to the turnaround time for loan processing, the time from loan application to disbursal should not exceed 48 hours for instant loans.

Final word

Simultaneous application of loans with multiple lenders must be avoided at all costs. All lenders take stock of your recent inquiries as part of their eligibility screening and a high number of inquiries tend to compromise your eligibility. Doing so will also negatively impact your eligibility score and undermine your chance of loan approval.

Furthermore, it is of vital importance on your part to review the loan agreement with utmost care and attention. Obtaining maximum information on both a lender and its standard requirements will go a long way in helping you assess which lender will suit your requirements best. All compliant and registered lenders will disburse the loan against a determinate loan agreement which sets down all the finer details and terms and conditions.

Moreover, they are also required to add a section of MITC, or most important terms and conditions. This set of terms and conditions contains the most essential information with regards to the loan and is readily available for customer perusal and paying attention to each detail is a must. Ensuring you follow these simple yet effective steps can enable you to avail instant loans seamlessly and avoid any unnecessary issues.

Abhishek Soni

CEO and Co-Founder at Upwards

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