Outlook Money
Instant loans are those type of loans that are short-term, small-size credit facilities distributed through mobile apps.
The quick disbursals that these loans offer are one of their best-publicised aspects.
These loans typically range from Rs 1,000 to Rs 5 lakh, with tenures of 7-90 days.
The interest rates for instant loans are extremely high with around 30-36 per cent annualised.
There are typically non-refundable processing fees, convenience fees, and late payment fees, which increase the effective borrowing cost of these loans.
These loans have short payment terms, so a borrower is generally supposed to pay the interest, fees, and principal in a short period of some days to a few weeks (12 months, in case of a large amount).
If one repays these loans on time, it can have a good impact on the credit history but if one is inconsistent, it can have long-term effects.
Individuals can also go for safer options that include advances against employer advance schemes, regulated credit cards, or formal personal loans at lower costs with longer terms.