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Payday Loans in India

what is payday loans

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    Payday loans are small-term loans made to cover your immediate cash needs until the day of your next salary. Other names for payday loans are advance salary loans, cash advance loans and fast loans will clarify payday loans, describe how they operate, list their features, interest rates, eligibility requirements, benefits, drawbacks, and the top ten payday loan applications available in India.

    What are Payday Loans?

    Payday loans are small, unsecured loans that are usually repaid on your next payday. They are meant to cover unexpected expenses or emergencies that arise between your salary days. You can borrow from rupees 50,000 to rupees 5,00,000.

    Loan amount is decided according to your Income, Credit Score and loan provider. The loan tenure is typically 5 to 12 months but some lenders may offer shorter or longer terms. Payday loans are different from personal loans which are larger, longer-term and require more documentation and verification.

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    How Payday Loan Works?

    • Paying your bills: You can use payday loans to pay your utility bills, rent, credit card bills, or other dues that are due before your salary day.
    • Managing your emergencies: You can use payday loans to deal with any medical, travel, or household emergencies that require immediate cash.
    • Fulfilling your needs: You can use payday loans to buy something you need or want, such as a gadget, a gift, or a vacation.
    • Improving your credit score: You can be required to pay late payment fees if you are unable to repay your payday loan on time. This could raise your debt load and negatively impact your credit score.

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    Interest Rate of Payday Loan

    The interest rate of payday loan depends on various factors such as your income, credit score, loan amount, loan tenure, and lender. The average interest rate range of payday loan as on December 2023 is 10.5% to 21% per annum.

    However, some lenders may charge lower or higher rates depending on their policies and criteria. You should compare the interest rates and other charges of different lenders before applying for a payday loan. Check Kreditbee Loan App Review

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    Top 10 Payday Loan Apps in India

    There are many payday loan apps in India that offer instant and hassle-free loans to salaried individuals. Here are the top 10 payday loan apps in India based on their popularity, features, interest rates, and customer reviews:

    App NameInterest Rate (p.a.)Loan AmountLoan Tenure
    Finance Buddha10.5% – 21%₹50,000 – ₹5,00,00012-60 months
    Paisabazaar11% – 24%₹50,000 – ₹5,00,00012-60 months
    Rupee4need12% – 25%₹10,000 – ₹1,00,0003-12 months
    ATD Money13% – 26%₹10,000 – ₹1,00,0003-12 months
    MoneyTap13% – 24%₹3,000 – ₹5,00,0002-36 months
    EarlySalary14% – 30%₹5,000 – ₹2,00,0007-50 days
    CashBean15% – 33%₹1,500 – ₹60,00015-90 days
    KreditBee16% – 36%₹1,000 – ₹2,00,0002-15 months
    NIRA18% – 24%₹5,000 – ₹1,00,0003-12 months
    Credy18% – 36%₹10,000 – ₹1,00,0003-12 months

    Features of Payday Loans Online

    Some of the common features of payday loans are:

    • Instant approval and disbursal: Payday loans are processed online and you can get approval and money in your bank account within 2 hours of applying.
    • Minimal documentation: You only need to provide your PAN card, Aadhaar card, bank statement, and income proof to apply for a payday loan. No collateral or guarantor is required.
    • Flexible repayment: You can choose to repay your payday loan in one lump sum or in easy EMIs as per your convenience. Additionally, there are no penalties for early repayment or loan foreclosure.  
    • High interest rates: The interest rates for payday loans fluctuate between 10.5% to 21% annually, which is greater compared to the rates of personal loans. This is a result of their shorter tenure and increased risk.
    • Late payment fees: You can be required to pay late payment fees if you are unable to repay your payday loan on time. This could raise your debt load and negatively impact your credit score.
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    Eligibility Criteria for Payday Loans

    Payday loan qualifying requirements vary between one lender to another, but below are some common requirements:

    • Age: Your age should be between 25 and 60.
    • Income: You monthly income should be at least 10,000.
    • Employment: You must work in a reputable organization for at least two years.
    • Residence: You should be residing in any of the 180 cities across India where the lender operates.
    • Credit score: Credit score: You should have a credit score of at least 650. But, some lenders may offer payday loans to borrowers with bad or no credit.

    Read Article: 29 Best Personal Loan Apps in India

    How to Apply for a Payday Loan Online

    You can apply for a payday loan online through the website or app of the lender of your choice. Here are the common steps to apply for a payday loan:

    • Step 1: Visit the website or app of the lender and select the loan amount and tenure that suits your needs.
    • Step 2: Fill out a simple online application form with your personal, professional, and bank details.
    • Step 3: Upload the required documents such as PAN card, Aadhaar card, bank statement, and income proof.
    • Step 4: Submit your application and wait for the approval or rejection from the lender.
    • Step 5: If approved, accept the loan offer and sign the loan agreement.
    • Step 6: Receive the loan amount in your bank account within 2 hours.
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    Advantages and Disadvantages of Payday Loans

    Payday loans have both advantages and disadvantages that you should consider before applying for them. Here are some of them:

    Advantages

    • Quick and easy: Payday loans are processed online and you can get money in your bank account within 2 hours of applying. You don’t need to visit any branch or submit any physical documents.
    • Minimal eligibility: Payday loans have minimal eligibility criteria and you can get them even if you have a low or no credit score. You don’t need any collateral or guarantor to secure the loan.
    • Flexible repayment: You can choose to repay your payday loan in one lump sum or in easy EMIs as per your convenience. You can also prepay or foreclose your loan without any penalty.
    • Emergency solution: Payday loans are ideal for meeting your urgent cash needs or emergencies that arise between your salary days. You can use them for any personal or professional purpose.

    Disadvantages

    • High interest rates: Payday loans charge higher interest rates than personal loans, ranging from 10.5% to 21% per annum. This can increase your debt burden and affect your savings.
    • Late payment fees: If you fail to repay your payday loan on time, you may have to pay late payment fees, which can increase your debt burden and affect your credit score.
    • Debt trap: If you rely on payday loans too often or borrow more than you can afford, you may fall into a debt trap and damage your financial health. You should use payday loans only as a last resort and repay them as soon as possible.

    Conclusion

    Payday loans are a quick and easy way to get cash in advance when you face a cash crunch or an emergency between your salary days. They are convenient, flexible, and accessible to anyone who meets the minimal eligibility criteria.

    However, they also have high interest rates, late payment fees, and the risk of falling into a debt trap. Therefore, you should use them wisely and responsibly and repay them on time. You should also compare the interest rates and other charges of different lenders before applying for a payday loan. You can use the payday loan apps in India to apply for and get a payday loan online within 2 hours.

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    FAQs

    Q.1 What are the benefits of payday loans in India?

    Payday loans are quick, easy, and convenient loans that can help you meet your urgent cash needs until your next salary day.

    Q.2 What are the drawbacks of payday loans in India?

    Payday loans have high-interest rates, late payment fees, and the risk of falling into a debt trap if you borrow more than you can afford.

    Q.3 How do I repay a payday loan in India?

    You can repay your payday loan in India on or before the due date either in one lump sum or in easy EMIs as per your agreement. You can also prepay or foreclose your loan without any penalty.

    Q.4 What are the alternatives to payday loans in India?

    Some of the alternatives to payday loans in India are personal loans, credit cards, overdrafts, gold loans, and peer-to-peer lending platforms.

    Last Updated on 7 months

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      Vishal Kumar

      Vishal is a content writer who writes articles on various topics and is currently working as a writer on loan, banking, and business related financial topics on LOANPANDIT website. Vishal works to explain financial concepts to the readers in a very simple way through his attractive and informative articles. Their goal is to empower people to make financial decisions.

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