What Are Payday Loans in India and How Do They Work?

There are multiple forms of credit that one can purchase from banks. These forms of credit differ based on their conditions, the loan duration, and a variety of other factors such as personal loans, education loans, home loans, etc. One such form of credit option is known as a payday loan. In this blog, we will explore what is it that makes personal payday loans a preferred choice for consumers, what are the interest rates and much more.

What Does a Payday Loan Mean?

A payday loan is a short-term, high-interest loan. The loan amount is based on your upcoming paycheck, making it a convenient option for those in need of instant payday loan solutions. However, the cost of borrowing through a payday loan in India is usually much higher than other forms of credit, such as personal loans or credit cards.

Additionally, due to the fast disbursal process, payday advance loans online have become a popular option for those seeking quick access to funds.

Read more: What is a personal loan?

What are the Interest Rates of a Payday Loan?

Payday loans online often come with steep interest rates, sometimes reaching as high as 30%. The cost of borrowing can quickly add up, making it essential for borrowers to understand the full terms before applying for a payday loan India option.

What is the Eligibility Criteria for Applying for a Payday Loan?

Here are some of the eligibility criteria for applying for a short term payday loan:

• The primary borrower must be an Indian citizen.

• Borrower should also be above 18 years of age to be eligible for the loan.

• Must have a regular source of income and full-time employment.

• The applicant must have an active current account in the bank.

• The candidate should also ensure that they have the right documents in place for a payday loan.

• An active phone number is also needed.

Read more: What is the minimum salary required to get a personal loan?

How can I Apply for a Payday Loan?

Here are the steps on how you can also apply for a payday loan in India from your preferred bank:

• Go to the nearest bank branch and collect a form or fill up the application from the net banking portal of your bank.

• Enter all the details as they are required.

• Provide all the documents as needed.

• Wait till the lender approves your online payday loan.

• After all the documents are verified, you will get your payday loan.

Read more: How to improve your credit score – complete guide

What Documents are Needed for a Payday Loan?

Here is a list of the documents that you will need to get a payday loan instantly:

• Proof of Identity (PAN card, Aadhaar card, driver’s license, voter ID, passport)

• Proof of Address (Aadhaar card, driver’s license, voter ID, passport, ration card, utility bills)

• Proof of your age

• Income proof

• Letter from your employer or organisation

• Passport-sized photographs

Read more: What is an unsecured personal loan?

What are the Different Features of a Payday Loan?

Here are some of the features of the paydays loan online which help it to stand out from the other forms of short-term credit:

• The amount that you can borrow is usually small and the repayment tenure is also short.

• You are required to pay the borrowed amount as soon as you have received the salary.

• The due date of the loan amount usually varies between 2 weeks to 4 weeks.

• The credit from a payday loan can be offered in terms of cash or a cheque.

• Quick payday loans are disbursed fast, often with minimal paperwork.

• The loan application process is usually fast, and credit is disbursed quickly too.

• Most of the banks that offer urgent payday loans do not check your credit history.

• While applying for a loan of this kind, remember that the lenders are never too stringent about the requirements.

• Payday loans are considered a form of unsecured loans, which is why the borrower won’t have to offer any collateral while applying.

• These are very high-risk loans, which is why the rate of interest is also high.

Read more: What is the importance of credit score?

Apply for a Personal Loan from Airtel Flexi Credit

If you are looking for the best payday loan to get credit quickly, without paying a huge rate of interest or high EMIs, then choose Airtel Flexi Credit. With Airtel Flexi Credit, you will get personal loans with all the benefits added, and without any of the headaches.

With Aitrel Flexi Credit, you get a completely digital process, minimal paperwork and flexible EMI options. In addition, the loan application process is extremely simple and effortless. So, stay away from the high-interest personal loan offers in today’s market and choose Airtel Flexi Credit.

FAQs

What is Payday Loan?
Short term payday loans are high-interest loans designed to help individuals cover urgent expenses until their next paycheck. They typically have a quick approval process and are meant for immediate financial needs.

How much do payday loans cost?
Payday loans come with high interest rates, typically ranging from 1% to 3% per day. This can lead to an annual percentage rate (APR) of 365% or more. In addition to interest, some lenders may charge processing fees or penalties for late repayment.

How much can I borrow through a payday loan?
The loan amount typically ranges from ₹5,000 to ₹1 lakh, depending on the lender and the borrower’s monthly salary or ability to repay.

How long do I have to repay a payday loan?
Payday loans in India are short-term and usually need to be repaid within 30 days or by the borrower’s next payday. Some lenders may offer flexibility with installment options, but this varies.

What happens if I can’t repay a payday loan on time?
If you’re unable to repay the loan on time, you may incur additional late fees and penalties. Your credit score could also be negatively impacted, and lenders may take legal action or report the default to credit agencies.

Are payday loans regulated in India?
Payday loans in India are not explicitly regulated in India like traditional loans, but lenders must comply with general lending guidelines set by the Reserve Bank of India (RBI). Borrowers should carefully review the terms and conditions of the loan before applying.

Can I apply for a payday loan if I have a low credit score?
Yes, some payday loan providers may approve loans even if you have a low or no credit score, as these loans are often based more on income than credit history.