Instant payday loans are high-interest unsecured loans that have a very short tenure. To cater to short-term financial crises, these loans get disbursed instantly, and borrowers usually have to repay upon receiving their next paycheck. Read on to know what is payday loan, how to apply, and the benefits.
Payday loans function differently from other consumer loans, like personal loans. Because of their increasing popularity, even reputed financial institutions have started offering these loans.
One can attain a quick payday loan by visiting a nearby branch of a lender. Alternatively, they can apply for this form of financial assistance online. The premise is that borrowers need to repay the principal amount and interest by the time their next paycheck arrives.
Let’s say that Ravi requires Rs. 40,000 for his child’s college fee, but you are a week away from your next salary. So, you conveniently avail a payday loan for Rs. 40,000. A lender might ask for some employment verification documents along with proof of address and identity proof. After the documents are verified successfully, the loan amount will get transferred to his bank account immediately.
Lenders, on average, charge an interest rate of 1% per day on the loan amount in the case of such form of credit. Now, if the interest rate in the above example is 1%, Ravi has to repay —
Rs. 40,000 (Principal) + Rs. 2,800 (Interest) = Rs. 42,800
Thus, within 7 days, Ravi has to repay Rs. 42,800 to his lender.
Here are the benefits of payday loans:
While there are many benefits of a payday loan, you must also be aware of the flipside. Here are the disadvantages of payday loans.
Also Read: Apply For Instant Personal Rs. 15,000 Loan In India: Features, Benefits & Steps To Avail
Even though payday loans are growing in popularity, there are various disadvantages of availing a payday loan:
But don’t worry. Here are a few alternatives to payday loans that can help you during an emergency.
While payday loans do offer numerous benefits and solve the problem of emergency cash requirements, they can lead to heavy debt burdens. Thus, it is worth exploring some alternatives, such as the following:
Borrowers may also consider applying for a personal loan. Nowadays, with the online loan process, the disbursal time of personal loans has reduced immensely. Furthermore, lenders like Navi offer personal loans of up to Rs. 20 lakh at attractive interest rates. Owing to the paperless and hassle-free application procedure, individuals can get access to funds instantly.
Download the Navi app and apply for an instant personal loan to fulfil your urgent financial requirements with ease.
If you are opting for a payday loan to deal with your short term cash crunch, then you should know the following details:
Also Read: A Brief Introduction To CIBIL Score
Arranging funds during an emergency can be very difficult and stressful. Not all individuals have savings or emergency funds. Fortunately, instant payday loans bring a solution to the problem of short term cash crunch. However, given the high-interest rates and short tenure of these loans, one should consider their financial capabilities before availing them.
The repayment tenure of a payday loan usually ranges from 7 to 60 days. You can try to opt for a maximum repayment tenure of 3 months. However, you cannot extend or delay paying the borrowed amount and interest beyond your chosen tenure. If you do so, you will have to incur additional costs and might get penalised.
To be able to avail a payday loan, you have to be at least 18 years old and an Indian citizen. Furthermore, most financial institutions only offer this loan to full-time employees who have a regular source of income.
To allow for a hassle-free and simple process, these loans usually need only bare minimal documentation. Thus, borrowers need to furnish their proof of address and identity proof. Along with those, some lenders might ask for proof of income.
Usually, because of the high-risk involved in repaying this loan, lenders usually offer it to full-time employees only. However, if you show a regular source of income through your part-time employment, you might get a payday loan. This will come at a very high interest rate.
Before you go…