Are Lightning Fast loans a myth?

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Lightning fast loans is a very new concept in India and only a very few companies in major metropolitan cities like Delhi and Mumbai has come up with quick fast loans for the ease and convenience of small business customers.

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Start-ups which have just started off and need quick money for initial requirements such as complying with norms of the incorporation process (subscription statement, affidavit, minimum capital) or office setup may not able to produce any collateral or company history. The promoters or the directors of the company do not prefer taking personal loans keeping their assets as a security.  Such companies can look for online lenders which often provide small payday loans.

Lenders typically provide small, short-duration loans to small businesses and budding start-ups for their initial requirements. Since they are professional centers, they often conduct a lengthy due-diligence process as well. Banks do offer a large business loan for start-ups where one can avail term loans, lines of credit and mortgages to buy properties. But banks might look at personal credit history of the owners and partners, along with the company’s detailed operating history. Due to these factors, getting business loans from banks can take up to three to six months’ time and with continuous pestering especially the government banks.

However, the biggest upside with bank business loans is that being pure debt funding options, they are purely focused on your ability to return the money that you have borrowed and not how your business is functioning. They always look for those companies who have the strong financial background and is willing to pay interests. You have to repay the loan at fixed intervals, and if not paid they can sue the company for insolvency and the company can face major problems and can even wind up.  They are not interested in being partner or shareholder of the company or earning a profit, their main intention is to get their money back with interest.

As there are an extremely small number of companies that provide online loans with the lightning fast process, this kind of business is seen mostly in foreign countries like Canada, Ireland, Australia. It is only possible in a utopian world because, in reality, such ideas do not last for long due to the following reasons

  • If there is a default, your Lender could come after you -Even if a personal loan isn’t backed by any asset attached to your personal property, a lender may still be able to place a lien on your assets in order to secure repayment. In order to obtain a lien, he must sue you in court. In addition to the payment of the original loan that was borrowed and also the late fees, you could be liable to pay for attorney fees and court costs.
  • Strict repayment terms in the contract-lack of proper terms and conditions of the agreement as to how the loan should be replayed and inefficiency in planning the agreement. It should be kept in mind whether the provider responses to any issues in the process or in case if there is any doubt or clarification in the process
  • A number of inexperienced service providers who don’t have sufficient knowledge in this field, a slight mistake could cost the business.
  • Loan Amounts are comparatively smaller-It’s no secret that lenders make money by charging interest on loans, but there’s no gain if the loan is not repaid. To limit the risk of borrower’s default, lenders don’t prefer to provide a high amount of money.
  • Rates Are Higher-The very word “unsecured” mean there is a lack of security which leads to a lack of protection against the members of the business as they will be personally liable if not repaid. Thus, quick payday loans are riskier than loans secured by the property as lenders tend to charge higher interest rates. The rate of interest depends on your credit score and the amount of money that you’re borrowing. It’s important to note that lenders may hide a portion of the higher interest rates in upfront fees such as loan origination and application fees.

Thus, it can be quite risky for the partners, members, and directors of a business to opt for lightning fast loans. Through Facebook, Twitter and other social media, these services have gained popularity among the people yet there are many loopholes and flaws for which businessmen are quite reluctant about it and only a few companies like providing such services in India.