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How to choose between a Personal Loan and Salary Advance Loan?  

A generation ago, reaching out to friends and family or seeking money from local moneylenders was the only option for financial emergencies. Taking money from friends and family came with the risk of spoiling relationships. The local moneylenders who asked for unusually high-interest rates were known for harassing the borrowers.

The financial institutions revolutionised lending with formal routes to access money via a personal loan. An applicant could opt for a personal loan in Delhi instead of reaching out to local moneylenders or friends and family.

Technology further enabled instant personal loans, reducing the process from weeks to a few days. The platforms like Loans Jagat now help applicants with instant access to personal loans and offer tools like the personal loan EMI calculator.

Recently the app stores are flooded with apps offering advanced salary loans without demanding a high credit as in personal loans. The convenience of getting the amount in a few taps lures the users. However, as they say, god and the devil both lie in the details. Let us dig in further to understand the differences.

1. Application Process

A personal loan is availed online or offline with the leading financial institutions. Technology platforms like Loans Jagat make it easy to apply for instant personal loans. Applicants need to enter the primary information. Loans Jagat provides offers from the top lenders’ that applicants can choose and avail of the instant personal loan. A personal loan depends upon the credit profile and a good credit score.

The Salary Advance Loan is processed using the many advance salary apps that are now available. These apps read through the personal details from the mobile login. The advanced salary apps also provide small-ticket loans to individuals with comparatively lower credit scores than a personal loan.

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2. Interest Rate

A personal loan in Delhi is available at an interest rate starting at 9% and may go up to 20% per annum. The applicant is made aware of the interest rate during the application process and the loan agreements.

The advanced salary apps mask interest rates under headers like a monthly fee, subscription and monthly interest. On closer scrutiny, the loan interest rate comes out to be significantly higher, 30% per annum to more than 50% per annum.

3. Loan Amount

A personal loan is available from a few thousand rupees up to INR 50 Lakhs. The financial institutions offer the loan amount as per the loan eligibility and credit profile.

The advanced salary apps offer small ticket size loans starting as low as INR 4000 and may go up to a maximum of INR 1,00,000 only.

4. Repayment

An instant personal loan may be repaid throughout 5 to 6 years using equated monthly instalments, resulting in a lower monthly impact on the borrower.

The advance salary loan is a short duration loan with repayment within three months to 1 year.

5. Pitfalls

A personal loan has a documented process where applicants are aware of the factors like interest rate, tenure, repayment modes and terms like prepayment.

The advanced salary loans disguise the terms under the gauge of convenience. Several users have complained of harassment by these salary apps. The apps have been using the borrowers mobile contacts to send harassing messages.

Verdict

A loan is to meet financial emergencies. Applicants should be careful in availing of a personal loan. Advanced salary loans are convenient and often not looked upon as a loan. Applicants often fall for these loans and repent later.

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