How Do Quick Loans Compare to Other Types of Credit?

Financial management is a hot topic these days, and responsibly borrowing can be a powerful tool for the same. It allows you to seize opportunities that might otherwise be out of reach. From starting a business or fixing a car to making necessary home improvements or consolidating debt, credit turns out to be really helpful.

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Nevertheless, nowadays, a lot of credit types and sources have become readily available online. Therefore, finding a suitable funding option for your immediate financial relief might seem a bit tricky than usual. Here’s a quick guide on finding loans that are fast and convenient to borrow.

Let’s understand what fast or quick loans you can borrow compared to traditional options and how they stack up against other forms of credit.

Understanding What are Quick Loans

As the name suggests, a quick or fast loan is designed for fast and convenient access to credit. Such loans typically have a smaller loan amount disbursed within a short period. This makes them suitable for emergency situations or unexpected expenses like a medical emergency, immediate house repairs, etc.

Here’s a closer look at the key characteristics of quick loans:

1. Disbursement: These loan types are one of the fastest ways to obtain funds among most credit options. Sometimes, even within the same day you can get the approval on your application.
2. Credit Check: While some lenders may perform a credit check, it’s not always mandatory for quick loans. After all, your credit score or the borrowing-repayment history is a major factor when it comes to borrowing bigger amounts of loans.
3. Interest Rates: Due to the quick processing and risk involved for lenders, quick loans come with higher interest rates. These can range from 16% to 30% per annum, depending on factors like credit check, loan amount, etc.
4. Repayment: Quick or fast loans come with shorter repayment terms. Since you’re borrowing less and for immediate requirements, lenders expect a repayment structure that lasts a few weeks to a few months.

Quick Loans vs. Other Credit Options

Quick loans offer speed and convenience. However, it’s important to understand how they compare to other credit options as well. Here are two credit options in comparison based on some common aspects:

Payday Loan

1. Disbursement: Payday loans, also known as salary advances or cash advances, are known for their speed. Approval can be quick, and you might receive the funds within the same day or the next business day. However, this is only possible if you’re a salaried individual.
2. Interest Rates: Be aware! Payday loans come with very high interest rates and fees. These might be advertised as a flat fee, but the interest rate calculated annually (APR) can be extremely high. It’s important to compare before borrowing.
3. Repayment: Repay the loan in full on your next payday, usually within two to four weeks. While payday loans might save the day, the repayment period is also short-term, which can be tricky. Therefore, it is a must that you plan carefully to avoid taking out another loan to repay the first, which can lead to a debt cycle.
4. Credit Check: Payday lenders in India may or may not check your credit score. Even with a low credit score, you might be eligible. But remember, the high cost of payday loans makes them a last resort. Consider alternatives first.

Credit Card

1. Disbursement: Credit cards offer the advantage of immediate access to credit up to your sanctioned limit. This makes them similar to quick loans but the purpose of using cards is everyday purchases or managing unexpected needs.
2. Amount: Your credit limit on your card depends on your creditworthiness, which is again similar to quick loans. Individuals with a strong credit history can qualify for higher credit limits, which offer more flexibility for larger purchases.
3. Interest Rates: Credit cards can be a double-edged sword when it comes to interest rates. If you pay your balance in full within the grace period (usually around 30 days), you won’t incur any interest charges. This makes credit cards a cost-effective way to borrow for short periods. However, if you carry a balance on your credit card which is due, a high-interest rate can be levied on it. These interest charges can quickly snowball and become a burden if you’re not careful.
4. Repayment: Credit cards require minimum monthly payments, but interest applies to any outstanding balance, unlike quick loans. This means you can repay your purchases over time, but interest will accrue on any unpaid amount.
5. Credit Check: Credit cards also require a credit check to determine your eligibility and credit limit. Your credit score plays a significant role in determining your approval odds and the interest rate you are offered.

Looking for a Quick Funding Option?

Quick or personal loans offer a speedy solution for emergencies, but their interest rates make them an option to consider. The key takeaway is to choose the right credit option for your situation and borrow responsibly.  Always compare interest rates and fees from different online lending platforms like KreditBee.

Borrow what you can comfortably repay on time and fulfil your immediate financial requirements with KreditBee today!

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