Having a Poor Credit History? You Can Go for Pay Day Loans

27 Oct 2020 5 min read
Personal Loan: Having a Poor Credit History? You Can Go for Pay Day Loans - Afinoz

There might be instances where our dealings with finances may be not up to the mark in the past. This could lead to a poor credit score that creates hindrance in getting loan approvals. The circumstances are not the same every-time for everyone, and thus it leads to missed out payments or delayed payments of loan installments.

But emergencies do not wait for all these factors and arrive unannounced. Its quite necessary that one always should keep a check on their credit report to keep it updated and rectified, following any errors or mismatch. However, if still there arrives a situation where you’re are in need of urgent funds to look after the requirements, you should know you have a backing of Pay Day Loans.

What are Payday Loans?

A payday loan is an unsecured ultra short-term borrowing meant to help the individual tide over a temporary shortfall. It can be considered as a personal loan that can be availed for 7-30 days that has to be paid along with interest when you get your next salary. 

Typically Pay Day loans are for borrowers who are in desperate need of cash and who have exhausted all other means of availing funds. Chances are that availing a personal loan is not possible owing to bad credit history and the credit card has already hit the limit. The funds availed through payday loans can be used to pay off one’s regular bills, emergency medical needs, school fees for children or any other short term need of funds urgently. 

The payday loans do not require any security to be put up or pledged, nor does it require any guarantor or collateral to be availed. It can be availed both online and offline and ideally should be repaid on the next payday of the borrower. 

Features of Payday Loans

A borrower in need of payday loans should know the features that have been listed out below:

  • Payday loans have a faster loan processing and approval process.
  • Under payday loans, a borrower can withdraw a small amount and loan with a short-term repayment tenure.
  • Payday loans are also available to borrowers having a bad credit history.
  • There is no such laid out stringent guidelines for availing the payday loans, with respect to tons of paperwork or having a minimum monthly salary.
  • As payday loans are unsecured loans and do not ask for any security to be pledged or any guarantor to be jointly applied. Therefore, the interest rates are on the higher side.
  • The lenders do not strangely follow checks to ensure whether a borrower has the capability to repay the loans or not, along with taking care of his/her other financial obligations.
  • The disbursal amount of payday loans are usually in the form of cash, a prepaid credit card, or a cheque that will be electronically deposited into the borrower’s account. 
  • The tenure ranging of payday loans ranges from 2 weeks to 4 weeks starting from the date the loan has been borrowed. The agreement of payday loans mentions the date on which the borrower has to repay the loan.
  • The documents required to avail payday loans are minimal. 

Let us understand what are the Eligibility Criteria to avail Pay Day Loans:

The requirement to apply for this loan varies from lender to lender but here we will be discussing the common criteria that should be fulfilled by a borrower to avail the funds.

  • The borrower must be a resident of India.
  • He/She should be a minimum of 18 years of age.
  • Must have a source of income.
  • Must have an active account from which installment will have to be paid.
  • Must have all the documents required to apply for the loan.
  • Must have an active phone number to reach out in case of need.

Features of Payday Loans

Like any other loan, a borrower has to furnish the below-mentioned documents to avail payday loan.

  • Passport size photograph
  • Identity Proof 
  • Address Proof
  • Income Proof
  • Letter from employer

How to apply for Payday Loans? 

Availing payday loans is very simple and even a first-time user can simply click on a few tabs to get funds when in need. Let’s find what steps one has to follow in order to apply for these loans.

  • The loans can be applied online or offline. To apply online a borrower will have to visit the portal of the lender and follow the steps mentioned. To apply offline the borrower will have to visit the branch and make the necessary requirements.
  • Whether one is applying online or offline, it is necessary to dully fill the form and submit it to the lender.
  • Furnish all the required necessary documents.
  • Once all the papers are in place and it meets the eligibility criteria, the lender will not delay the approval.
  • Once it gets approved the lender will ask for the required supporting documents.
  • Once all the necessary formalities have been fulfilled, the loan gets disbursed and the amount gets deposited to the account of the borrower.

Payday Loan Lenders and their charges: 

Lender

Loan Amount

Interest Rate

Tenure

Loan4smile

Rs 5,000 to Rs 5 lakh

1-2% per day

Max 30 days

Exceedcash

Rs 10,000 to Rs 1 lakh

0.1 – 1% per day

Min 61 days

Max 90 days

Credit Bazaar

Rs 10,000 to Rs 1 lakh

0.1 – 1% per day

Min 61 days

Max 90 days

Loanwalle

Rs 5,000 to Rs 5 lakh

1-2% per day

Till next salary date

Disadvantages of Payday loans

While payday loans look attractive in financial emergencies, borrowers can end up in a vicious cycle of debt.

  • Much higher-interest rates: While the interest rate per day may not seem much higher, per annum interest rates may go up to 400% or even more.
  • Debt Trap: If you are unable to pay off the loan on time, this may incur huge penalties and additional costs. Sometimes, borrowers may find it impossible to repay the loan and get into a very vicious debt cycle.

Source: Company Websites

The main aim of payday loans is to help the borrowers manage the cash flows by giving him/her a loan to meet the temporary financial crunch and repay in easy monthly installments. Not all lenders charge a hefty interest rate. Many of them also warn borrowers upfront of the costs of repayment and borrowings. It is advisable to only go for these loans when all other options have been exhausted. Repeatedly availing these loans will soon make one go bust. 

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