The fast-paced lifestyle necessitates the need to have funds at our disposal for meeting financial exigencies. Though most people have regular savings to meet such needs, still many income groups fall short of funds. At such times, instant loans come as an easy financial choice. A payday loan refers to a
short-term loan that helps salaried individuals cover their immediate cash needs until their next paycheck. However, it is a high-cost loan as compared to a personal loan. Let us explore what is a Payday Loan and how it works in India.
What is a Payday Loan?
A Payday loan is a short-term unsecured loan. It normally gets repaid within two weeks to a month, i.e., close to an individual’s next payday. Payday loans help in meeting immediate cash needs including house rent, school/college fees, and the like which are not possible to withhold till the next payday arises. These loans are availed by salaried individuals, who have to ensure that the loan gets repaid in their next salary.
Payday loans are especially helpful for those who have difficulty managing their day-to-day expenses and often struggle by the month-end. However, owing to their short-term nature, payday loans carry a higher rate of interest as compared to other small-term loans like
personal loans. But still, borrowers prefer it due to convenience. In India, payday loans are availed to meet expenses towards weddings,
medical emergencies, and paying school fees.
Key Features of Payday Loans
- Payday loans are based on the applicant’s salary particulars and generally do not exceed them
- Payday loans are very short tenure loans, normally from two weeks to a month till the next payday
- Instant approval with minimal documentation, with borrowers having a regular source of income
- Payday loans are for satisfying immediate cash requirements, hence have a higher rate of interest than other short-term loans
- Collateral free loan with no credit checks required, hence easily available
How does Payday Loan work in India?
Payday loans function in a different manner as compared to personal loan and other loans. You can avail of a payday loan either through online mode or by visiting the branch of the lender providing the payday loan. States in India could offer different payday loan terms including interest and fees. Once your payday loan gets approved, you would receive the amount through a cheque or your bank account. You have to ensure repayment of the money as per the payday loan terms approved with the lender in India, which is mostly before your payday.
Payday loans are a popular option owing to their convenience and easy availability. However, Payday loans come with a charge based on the loan availed. As they have a short repayment period, the interest charged is higher.
Which is better – Payday loans or Instant Personal Loans?
Payday loans are particularly helpful for salaried individuals who do not have other funding alternatives. However, since the interest rate is high, a personal loan is a better choice for any long-term loan requirement, as it gives
flexible repayment options at lower interest rates.
Instant loan apps like Hero FinCorp Instant Personal Loan provide customized personal loans which make it easier for the borrower to fund their immediate short-term fund requirements at attractive loan terms than a payday loan.
