Introduction To Payday Loans
Payday loans are loans given against your next payday, and they usually come with a small amount of money due to the relatively high cost of money and small amounts payable.
They are usually given for a set amount of time. This means that you pay back the loan once your next payday comes around. They are a form of short-term credit, and are usually taken out as emergency loans. They have become very common in India these days.
Whether you need a quick cash injection or a long-term financial solution, payday loans are a great option. A payday loan is a short-term loan, usually between Rs. 10,000 to Rs.2 lakhs, that you receive quickly in the form of cash. You typically have between 30 to 90 days to repay the loan, which is interest free. You can repay the loan at time during this tenure for no additional fees.
Have You Tried Exploring Personal Loans For Your Needs?
Payday loans are short-term credits that are intended to cover expenses until the next paycheck. They’re a great way to get the money you need when you need it, but they do have their disadvantages. Before you take out your next payday loan, it’s worth taking a moment to consider the key benefits and drawbacks of the service.
#1 The application process is pretty stress-free. A standard application for a payday loan is quick and easy, and includes three simple steps. Most payday loans are processed through mobile apps so you need to download the app first. enter your personal details and financial details, like PAN card, Aadhaar number, and bank account details. Apply for the loan and wait for approval.
#2 You can use the payday loan amount for any requirement; no restrictions there. You can use the cash to pay utility bills, travel, make a holiday or buy something on e-commerce platforms.
#3 They do affect your credit scores; Your credit score will suffer if you make late payments or default on the payday loan at a later date. So, it’s important to make sure that you don’t use the loan for purchases that you can’t afford to repay. If you use the money for something that is important to you, like a trip, then you could be worse off than if you stayed on track.
#4 Ensure that you are capable of repaying the payday loans on time; Payday loans are an extremely useful resource for those in financial distress. However, because of their short term nature and high interest rates, you should only take out payday loans if you can afford the repayment of the loan. Many borrowers take out a payday loan and then make several late repayments, making their debt situation worse.
#5 The interest rate is pretty high; The interest charged is quite high. A payday loan of Rs. 10,000 will charge you an annual interest of more than Rs.3000; and for a loan of Rs.1 lakh, you can expect to pay more than Rs. 25,000 in interest. So you are better off getting a payday loan only if you are able to repay it without incurring any charges.
#6 Did you look at alternate loan options?
Though payday loans are quick to get, owing to their high interest rates, borrowers should look at alternate loan options too. There are numerous other loan options available, like credit cards, personal loans, and housing loans. These options may be cheaper, but the application process for them is more complex than for a payday loan.
No doubt, Payday loans are a great way to take care of an imminent emergency. But individuals should be wary of over using any short-term loan product, or else they may find themselves in a tricky situation. Better to ensure that they only get payday loans if they can afford the repayments on time or can repay the loan within the stipulated time. Be careful of the interest rates and the terms and conditions of these loans as these can lead to a debt trap easily.