What is a PayDay Loan?
Payday Loans are a type of short-term borrowing or single installment loan availed during any short-term financial crisis. They are also called a salary loan, payday advance, payroll loan, short term, or cash advance loan. Payday loans are helpful when an employee or salaried professional making a monthly salary has an emergency fund need but has already consumed their salary. These types of loans are paid off on the following payday of the customer. Even though they carry a high interest rate, they are preferred by many individuals since they do not require any collateral or assets. Payday loans can be secured online and offline as well.
Characteristics of Payday loans
Before applying for a payday loan, you must be aware of its features which are listed below:
- The borrower can withdraw a small amount as a loan and the repayment period is generally short.
- Repayment of payday loans should be made on the next date of receiving salary or income.
- Payday loans are structured to be paid back in one lump-sum payment.
- Payday loan agreement made by Lender contains the due date on which the loan amount is to be repaid.
- Payday loans ordinarily have quick loan processing and fast approval.
- As these loans don’t require any collateral or security, the risk connected with them is exceedingly high. Hence, the interest rate charged for these loans is generally high.
Documents Required to Get a Payday Loan
- User Passport-size photograph.
- Your identity proof such as PAN card, Aadhaar Card, Driving License, Voters ID, etc.
- Address proof like Aadhaar card, Passport, Voters ID, Driving License, etc.
- Income proof- Salary slip, ITR.
Benefits of Payday Loans
- The process to get a payday loan is very convenient and hassle-free as compared to any other loan.
- The borrower can avail themselves of a loan anywhere in time of sudden emergency or financial crisis.
- Payday loans are disbursed in less than 24 hours after submitting the loan application. That’s why they are also known as instant cash loans.
- Customers with a bad credit score or a missing credit report can also avail themselves of these loans.
- No collateral or guarantor is required to secure a payday loan.
- Payday loans allow the borrowers to meet any urgent financial crunches.
Disadvantages of Payday Loans
- Since payday loans are provided for a short tenure, they are not apt for a financial crisis that will last longer.
- To be suitable for this loan, the borrower must have a steady flow of income with full-time employment.
- Individuals working part-time might not be eligible for this loan.
- If a borrower requires a large fund to meet their financial requirement, the borrower might have to look for any other financing option.
Payday loans may be helpful in emergencies, such as planning a wedding, paying medical bills, and many more expenses. Payday loans online may be beneficial when you are in a pinch and need money right away, these loans should only be borrowed as a last option if you are unable to cover unexpected expenses with your savings.