Both instant loans and traditional bank loans are financial tools that can help you meet your immediate financial needs. They are both unsecured loans that come with no restriction to end-use. However, there are a few stark differences between the two that you must know before choosing your lender.
Instant loans are online personal loan solutions that offer instant approvals and quick disbursals. In contrast, a traditional personal loan may take longer for approval and disbursement. You can apply for instant loans using a loan app that streamlines the entire process using cutting-edge technology.
Read on to discover the differences between instant loans and traditional loans.
The Difference between Instant Loans and Traditional Loans
- Loan Disbursal
Both personal and instant loans are unsecured loan products designed to help you meet your financing needs. However, there is a significant difference when it comes to the disbursal time. While personal loans might take up to 4 or 5 days to disburse, instant loans disburse in only a few hours. Hence, instant loans are the best option if you need money immediately.
- Processing
Online processing is one of the main advantages of selecting instant loans over traditional personal loans. Every stage of instant loan processing is done online, from application to disbursal. Automated software carries out the approval procedure making it error-free and fast. To apply for a traditional personal loan, you must physically visit the lender and present the necessary paperwork.
- Accessibility
Availing an instant loan is much easier with a loan app. All you need is to download the loan app, fill in the necessary details, furnish your documents and wait for the approval. The entire process is digital and there is no need to approach the lender physically. In addition to this, most online loan apps offer 24 X 7 assistance, which means you can submit an enquiry or an application from anywhere at any time.
For offline personal loans, you must visit the branch in person. You have to schedule an appointment with the representative, wait in the queue and enquire about the loan product. This makes comparing different loan offers very difficult. It also limits your options to the banks that have a branch near your location.
- Access to information
In the modern day, lenders offer web portals with comprehensive product information. This information covers the costs associated with their products, the interest rates, the loan criteria, and the documentation needed. This helps you make an informed borrowing decision after comparing different loan offers from different lenders. There are many loan comparison websites too that can help you select the best instant loan.
However, in traditional bank offers availing information may be a tedious task. You can get in touch with the loan agent and ask your questions, but there is a high chance that the agent would sugarcoat the offers to sell you the loan product. In addition to that, every time you need information on your ongoing loan you will have to visit the bank and wait in the queue. With an instant loan, all the information is available on the app.
- Documentation
Instant loans require minimal documents. As previously said, anyone can apply for this, followed by the online documentation procedure. Just upload your application form and supporting documentation to the lender’s website. The needed documents include proof of identity, proof of address, proof of income, passport photo and proof of age. You just have to make sure that the copies are scanned right and submit the documents in the right format.
With traditional bank loans, you must provide multiple copies of each document at different counters. Each document will be carefully examined, and its authenticity verified by the lender. The procedure could take some time because a lot of documentation is required.
- Loan amounts
Different lenders will offer you different loan amounts depending on your eligibility and their lending capacity. While an instant loan is perfect for small-ticket loans of about Rs. 1.5 lakhs, traditional banks can offer you higher loan amounts depending on your eligibility.
- Interest rates
The interest rates offered by instant loan apps are a bit lower than the traditional banks. This is because of the lower operational costs, digital verification, and smaller teams, in the fintech companies.
Conclusion
Instant loans and traditional loans are both very effective debt tools that can help you manage your finances well. However, both these lending instruments have a few stark differences that you must know in order to make the right choice.
If you want a quick small ticket loan, then opting for an instant loan through a loan app is your best choice. The interest rate offered by these loan apps is often lower than traditional banks. But if you want a high-value loan then a traditional bank may serve you better.
