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A Comparison of Instant Loan Interest Rates and Fees with Traditional Loans

The availability of personal loans has made it possible to secure financing for all your financial requirements as and when needed. A personal loan comes with many attractive features, but one of the most crucial features is their affordable interest rates. 

Until a few years ago, personal loans were infamous for their high-interest rates. With the high risk associated with these loan accounts, traditional banks used to charge a very high-interest rate on these loans. However, with the advent of online loan apps, the interest rates on personal loans have reduced significantly.

Read on to understand the difference between instant personal loans and traditional loans.

Affordability of Instant Personal Loans and Traditional Loans – A Comparison

Below given is the list of factors and parameters that can be identified for comparing the affordability of an instant personal loan against a traditional financing option.

Rates of interest levied

If we go through the history of rate levies in the personal loan financing segment, minus the inflationary factor, the overall levy of these rates has been on a downward trend. Typically, with policy changes that have been made in favour of the borrowing class, the rates of interest on these advances have only become affordable. 

In addition to that, the operational costs of these modern lenders offering instant loan is low as most of the processing is done digitally. This eliminates the need of maintaining multiple branches, a huge army of employees and lots of paperwork. Because of the reduced operational costs, they are able to offer a better interest rate to the borrowers.

Market competition

Over the years, new lending institutions have entered the personal financing segment. These lenders come from different financial institution types, like traditional lenders, NBFCs, etc. With the ever-increasing number of financiers for this loan segment with evolving platforms like online loan apps, the market competition has been on a historic high. 

This has led these lenders to offer better terms to borrowers to increase their customer base. This has resulted in better rates and favourable terms for these advances. This market competition can be typically observed in instant loan options available today as against the traditional financing options, which makes the former more desirable and appealing.

Evolution of financing modes

Over the years, the mode of personal financing has evolved significantly. Not only have lenders made digital financing possible through the likes of online loan apps but also offer quick funding availability through easy loan processing. Further, the loan models have changed too, making interest rate levies lower and more appealing to the wider masses. Today, financial institutions go out of their way to provide customer-centric products and services that make borrowing easy.

Fees and charges rates levied

Apart from interest rates, personal loans attract various other fees and charges as well based on the lending arrangement. Nevertheless, the fees and charges levied on these instant advances can have some differences from those for traditional loans. For instance, instant loans extended through online apps do not carry fees like statement charges, which become redundant. 

As opposed to that, traditional loans disbursed offline still attract these levies. Further, the rate of levy of these charges has also undergone changes and the borrower can easily identify the nominal levies that instant loans attract. In addition to that, many online lenders may offer great offers on your processing fees, like they may waive off your processing fees or other charges if you have an impeccable credit record.

Estimating the credit risk

In the case of traditional loans, the interest rate levied on your loan account was directly influenced by your credit score. However, today modern lenders check a number of factors to calculate the risk associated with your loan account. They don’t just depend on your credit score. This makes it possible for a borrower to avail a loan despite a low credit score. 

In addition to that, you can also negotiate your rate of interest with the lender based on your financial health. In addition to this, today, you can easily compare the rate of interest offered by different lenders online, but this was a very tedious process in the case of traditional loans. 


In conclusion, instant loans are more flexible, convenient and accessible as compared to traditional loans. However, many borrowers still prefer going with traditional loans because of the established reputation. But if you want to get the better benefits of availing a personal loan, then an online loan app can offer you better benefits.

You can easily download an online loan app and avail a quick loan in simple steps. In addition to offering better interest rates and reduced charges, loan apps also offer better management and transparency of your loan account. You can easily log into your loan account online and get any information you need.

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