When faced with a financial requirement, it is common to turn to loans as a solution. Two loan options gaining popularity today are personal loans and cash loans. And while they seem similar, there are important differences between the two.
This article lists out the differences between cash loans and personal loans so that you can make an informed decision about what suits you better.
1. Availability and disbursal
Cash loans are designed to provide immediate access to funds in urgent situations. These loans are typically processed quickly, allowing borrowers to obtain cash within a short timeframe. Urgent cash loans without documents, such as bank statements or income proofs, are particularly useful if you who need immediate financial assistance but may not have all the necessary paperwork readily available.
Personal loans are more comprehensive and flexible. They can be used for a variety of reasons, such as managing the expenses of your wedding or renovation of your home. Most personal loans usually involve a more thorough application process, requiring documentation such as proof of income, identification, and bank statements. The approval process for standard personal loans may take longer compared to cash loans due to the additional verification required.
However, in the case of instant loans such as the Bajaj Finance Insta Personal Loan, you may already have a pre-approved offer. All you need to do is check the offer amount and get the funds you need within minutes.
2. Loan amount
When it comes to the amount of money that can be borrowed, personal loans generally offer higher loan amounts. This is because personal loans are based on your creditworthiness, income, and financial history. The lender assesses your ability to repay the loan and determines the amount accordingly. Cash loans usually have lower borrowing limits since they are usually provided as short-term solutions for immediate needs.
3. Application process
Another distinguishing factor between cash loans and personal loans is the mode of application. Cash loans, including small cash loans on Aadhaar Card, can often be applied in person. The disbursal also happens quickly, and in cash. This convenience is especially beneficial for those in urgent need of cash, as they can avoid lengthy paperwork.
Most recognised financial institutions may refrain from providing cash loans, and instead offer personal loans, which are disbursed electronically.
Depending on your existing relationship with the lender, you may need to provide additional documents and undergo a comprehensive assessment of your financial situation. This is because personal loans typically involve higher loan amounts and longer repayment periods. Lenders want to ensure that you have the means to repay the loan.
In the case of the Bajaj Finance Insta Personal Loan, these assessments are made internally. You are offered a pre-approved loan amount without you having to go through an additional documentation process.
This reduces the processing and disbursal time significantly, allowing you to meet your urgent financial needs quickly.
4. Interest rates and charges
In terms of interest rates, cash loans may have higher rates compared to personal loans. This is because cash loans are often associated with short repayment periods and are provided without extensive credit checks. Lenders assume higher risk with cash loans, leading to increased interest rates. Personal loans, have comparatively lower interest rates since they are typically offered for longer terms and involve more stringent credit assessments.
When deciding between a cash loan and a personal loan, it is essential to consider one's specific needs and financial circumstances. Additionally, borrowers should carefully evaluate the terms and conditions, interest rates, and fees associated with each loan option.
Ultimately, the choice between a cash loan and a personal loan depends on the urgency of the need, the loan amount required, and your financial situation. Regardless of the chosen loan type, it is important that you borrow responsibly and ensure that you have the ability to repay the loan on time.
By understanding the differences and carefully assessing your requirements, you can make an informed decision and secure the financing they need.
