Instant Loan Apps: Safe? Credit Score and Credit Cards usage and charges

Sangram Chavan
Published in
4 min readJan 14, 2021


Any lender, whether online or offline, has to be a bank or an NBFC. The rules that apply offline, apply online too. If they are not a registered lender, then they are not legal. What they are doing is not compatible with India’s laws. How to verify? Check the website.

There are a number of apps that facilitate instant credit/loans; getting any kind of loan is not a good idea, better be self-reliant or in worst case scenario your people can come forward to help you; avoid unnecessary investment for few moments of pride; later that can damage your pride badly. Emotions and Finance are two different things. Instant cash comes with a good processing fee, heavy interest rates, and of course, TC + Privacy Policy are neglected generally. For loans from some of these apps, the processing fee is steep, as much as INR 2,000 for a loan of INR 10,000 with tenures under 30 days. Together with other charges including one-off registration costs, borrowers would end up paying, in real terms, interest rates as high as 60% per week, the report claimed. (Inc42, 2021) Such apps can also impact the credit score and sell user's data or utilize in illegal ways that might bring users in trouble.

Possible trusted solution:

The Paytm Postpaid service is available in 3 variants: Lite, Delite, and Elite. The postpaid ‘Lite’ comes with a monthly limit of up to Rs. 20,000. The convenience fee charged is then added to the monthly bill. Even people without a credit score can apply for this facility. Under the postpaid ‘Delite’ and ‘Elite’, one can opt for credit limits ranging from Rs 20,000 to Rs 100,000 monthly. Paytm claims that there are no convenience charges under the Delite and Elite facility. These users will also get access to all the postpaid features, unlike the ‘Lite’ users. (FinancialExpress 2020)

Under section 420 of the Indian penal code, defaulting on a loan even after several notices is considered a crime. When you default with your loan’s EMI more than 2 or 3 times your lender has the full authority to file a case of fraud and cheating against you.

Credit Cards

Credits cards are great if you need to create a credit history — Credit Score, required when you apply for a loan. If you use it wisely then you are in profit if the amount is returned on time, else it's fatal. For every spending, you gain reward cash that can be converted to cashback or would provide options to buy vouchers.

Points to remember:

  • Interest Levied on Credit Card Cash Advance may vary and additional charges apply. Typically banks charge 2.5% to 3% of the withdrawn amount subject to a minimum amount of Rs.300 to Rs.500 as a credit card cash advance fee.
  • A credit score can provide a better interest rate.
  • An interest-free period may be provided by the card-issuing institute. If the cardholder pays the outstanding amount within this period, the interest rate will not be levied. The grace period or the interest-free period offered by banks can range from 20 to 50 days depending on the type of credit card you hold. In the case of cash advances, this interest-free period is not applicable.
  • Points expire if not utilized in time.
Key factors affecting credit

How Credit Cards charges for example SBI?

SBI Credit Card Interest Rate on Unsecured Credit Cards: Up to 3.35% per month or 40.20% per annum

SBI Credit Card Interest Rate on Secured Credit Cards: Up to 2.5% per month or 30% per annum

The current rate of finance charges is from the transaction date and is subject to change at the discretion of SBI Card & Payment Services Private Limited(SBICPSL).

[ APR 40.20% = 0.110136986% per day compounding interest rate.

0.110136986% => 0.00110136986

For INR 1, (1.00110136986)³⁶⁵ = 1.49448069601 i.e 49.44% Effective APR

Day 1: INR 1 * (1.00110136986)

Day 2: INR 1 * (1.00110136986)* (1.00110136986)

Day 3: INR 1 * (1.00110136986)* (1.00110136986)* (1.00110136986) and so on.. ] (KhanAcademy, 2021)

Example: 2.70% per month interest rate


Credit Mantra

  • Pay off your balance every month.
  • Use the card for needs, not wants.
  • Never skip a payment.
  • Use the credit card as a budgeting tool.
  • Stay under 30% of your total credit limit.



Sangram Chavan

Entrepreneur and Tech Geek love to contribute to cause and faith in Karma