Instant Loan Alternatives: What You Need to Know Before You Apply

Instant Loan

An instant loan is one of the best financial tools to address your immediate financial needs. These loans are easy, simple and convenient to avail, manage and repay. You can easily download a loan app, and apply for an instant loan in a few clicks.

However, an instant loan availed through a loan app is perfect for your small-ticket needs. Most loan apps offer you quick loans of Rs. 10,000 to Rs. 1.5 lakh. So, in case, you need a higher loan amount, you need to check out the alternative options. In addition to this, instant loans are short-term loans, that you can avail for 12 months to 60 months, but not more than that. This tenure also depends on your creditworthiness.

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There are several alternatives to availing a personal loan that may offer you a higher loan amount, better loan term, longer tenure and lower interest rate. Read on to discover the best instant loan alternatives.

Instant loan alternatives that You Need to Know 

There are several alternatives to an instant loan that can help you meet your financial needs with better terms. You must know all your options to choose the best financial option.

Gold Loans

A loan against gold is a secured personal loan in which gold is used as collateral. Based on the weight of the provided gold and the current market rate, lenders calculate the loan amount. According to RBI regulations, lenders may offer loans equal to up to 90% of the gold’s current market value. 

Pros

  • Tax deductions for commercial operations or to buy a residential asset.
  • Despite a low credit score, the lender will approve your loan.

Cons

  • The lender may sell the gold if you cannot repay the loan.
  • The loan amount is based on the gold value.
  • Gold loans have a short repayment period

Loan against property (LAP)

You can get a Loan Against Property (LAP) on a property provided no debts are attached. A significant benefit of LAP is getting a higher loan amount – up to 80% of the property’s value. Since this is a secured loan, the interest rate is low as compared to instant loans. 

Pros

  • Eligible for funding up to 80% of the current value of your property.
  • Lower rates of interest.
  • Easy eligibility since the property is used as collateral and the credit risk is minimal.

Cons

  • Loan processing takes a lot of time, necessitating extensive documentation and property appraisal.
  • In the event of a default of EMIs, the lender will take possession of and sell the mortgaged property to recoup its losses.

Loan Against Credit Cards

A loan against a credit card is an unsecured personal loan that might have lower interest rates. If you are using a credit card, you can easily apply for an instant loan against your card. The financial institution credits the loan amount to your savings account if you are eligible. Also, the loan repayment terms are flexible.

Pros

  • You can perform numerous credit card transactions.
  • Credit cards offer rewards and discounts on purchases.
  • Responsible use of your credit card can improve your credit score.

Cons

  • Unpaid balances on credit cards have high-interest rates.
  • The enhanced purchasing power of a credit card might result in overspending.
  • Credit cards may have charges that can make them costly.
  • Using your credit card in public settings or when making online purchases increases your chance of experiencing fraud or identity theft. 

4. Loan Against Fixed Deposit

The amount of your fixed deposit (FD), a type of short credit, is eligible for an overdraft facility financial institutions offer. Your loan amount can be up to 90% of the FD amount. This loan process is the fastest as it requires minimum documentation. You can continue earning income on your FDs without breaking them if you take a loan against them.

Pros

  • Lower rates of interest and no hidden charges.
  • No worries about EMIs, and you can repay the loan at your convenience.
  • Minimum documentation.
  • Fastest approval.

Cons

  • The bank or NBFC can liquidate your fixed deposit if you cannot repay the loan.
  • Most banks only offer this feature once the first three months from the FD start date have passed.

Conclusion

When you need quick access to money, an instant loan can be helpful. You can apply for this loan using a loan app. Also, there are no end-use limitations on this collateral-free loan. But if a personal loan does not suit you, there are several other alternatives that can help. 

While you can use any of the loans listed above to get a loan with a low-interest rate, you should keep in mind that these are secured loans. Lenders reserve the right to recuperate their investment if you are unable to repay the loan. So, weigh your options and go for the one that best suits your needs.

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