Life can sometimes throw up unexpected situations. Whether you need to pay for a medical bill, or cover a key household expense, having a suitable loan can become a priority if you do not have sufficient savings to cover the shortfall.
An instant payday loan in India is often searched for when looking for short-term funding. Although the process can be more convenient when applied for online, the terms and conditions, loan amount, interest rates and disbursement times will vary depending on the lender and your financial situation.
It is important to know what an instant payday loan is, who can apply, what they cost, and how to choose the right lender. Below we have covered everything you need to know.
Instant Payday Loan
An instant payday loan is generally a short-term loan that can be applied for online, depending on the lender.
To give an example, if you are expecting a salary in a couple of days but need to cover a key expense now, you may decide to take out a short-term loan.
However, like any loan, you will need to make sure you can pay back the full amount, plus any interest and fees.
In India, payday loans are often searched for online, however this may not be offered by the lender. Instead, it may be referred to as a short-term personal loan or other credit. Always ensure you look at the loan product, check it is offered by a regulated lender, and understand the terms.
How do Instant Payday Loans work in India?
Many online lenders will allow eligible applicants to apply online. The lender will then review your application.
Although the process can vary, below is how you can usually apply for an instant payday loan.
1. Find the right lender
Find out who offers the right credit product. Ensure the lender is credible, has suitable loan terms, has good customer service, and is partnered with a regulated bank or NBFC.
2. Apply online
Fill in the required information.
3. Submit required documents
Depending on the lender, you may need to provide ID, proof of address, salary slips, bank statements and other income documents.
4. Awaiting review
The lender will review your application to ensure you meet their criteria, including looking at your income, ability to repay, and credit history. You will not be guaranteed approval.
5. Review offer
If approved, you will be given a loan amount, interest rate, fees, repayment terms and total repayment amount.
Once you have agreed to the terms, the lender will follow their process to disburse the loan. Although applying online can be more convenient, this is not guaranteed to be instant.
Read more: Salary Advance Loan in India
Who can apply for an instant payday loan?
Depending on the lender and loan product, there will be different criteria. It is important to note that just because you meet the basic criteria does not mean you will be approved. The lender will want to make sure you can realistically repay.
You may need to meet the following criteria:
- Age – Be within the age range of the lender.
- Income – Have a steady income. This can be from employment or other sources.
- Employment – Provide details of your employment.
- Identity – Provide documents to prove your identity.
- Bank Account – Have an eligible bank account.
- Ability to repay – Show you can realistically make repayments.
- Credit Criteria – Meet the lender’s credit criteria.
Some lenders will only offer loans to those in employment, whereas others may offer to the self employed.
Before applying, ensure you know what criteria the lender requires. This can help you avoid applying to lenders that are not suitable for your situation.
Read more: apply for an instant payday loan in India
Documents needed
Depending on the lender and your personal details, you may need to provide documents. Some online lenders may carry out checks digitally. However, others may require you to provide documents. Common documents can include:
Document/Information Purpose
- PAN or other ID documents To prove your identity.
- Aadhaar or other address documents To prove your address.
- Salary slips Proof of employment income.
- Bank statements To see your income, transactions and ability to repay.
- Employment details To confirm employment.
- Self employment/income documents To confirm income if eligible.
Not everyone will need to provide all of the above. It will depend on the lender and what checks they carry out.
Only provide personal and financial information through verified sources. Ensure you know what the lender’s privacy policy is and why they are asking for certain information.
Read more: Documents Required for Personal Loan Approval
Interest Rates, Fees and Repayments
One of the most important things to consider when taking out a loan is how much it will cost you. Just because you can apply for a quick loan does not mean it will be affordable.
Before accepting, consider the following:
1. Interest Rate
This shows how much you will pay to borrow. This can vary between lenders, loan product, borrower and terms.
Not all instant payday loans will be the same. Ensure you compare offers.
2. Annual Percentage Rate (APR)
The APR shows how much it will cost you annually to borrow. This can help you compare offers. The APR will need to be shown if you are taking out a digital loan that falls under the Reserve Bank of India guidelines. The lender will also provide a Key Fact Statement (KFS).
Ensure you read this carefully to understand how much it will cost.
3. Fees
Some loans may have a processing fee and other fees. Ensure you know what fees are applicable, if any taxes are included and how much you will receive after any deductions.
Do not be tempted by "low rates" and "quick approvals". Ensure you know how much it will cost.
4. Repayments
Ensure you know when you will need to repay. How many installments will there be? How much will you need to pay in total? What happens if you miss a repayment? Are there any penalties?
Ensure you know when you will need to repay and that it will fit with your income. If you will struggle to pay for essentials such as rent, food, utilities etc. then you may not want to take out a loan.
How to Apply for an Instant Payday Loan Online?
If you are looking to take out a short-term loan online, ensure you follow the below steps.
1. Know what you need. Calculate how much you need to borrow. Do not borrow more than you need.
2. Compare offers. Know what loan products you are eligible for. How much will it cost to borrow? How long will you have to repay? Ensure the lender is credible.
3. Know what criteria you need to meet. Ensure you are the correct age, have income, employment and other details.
4. Apply accurately. Ensure you provide accurate information. Only provide the documents asked for.
5. Read the loan documents. Ensure you read the KFS, sanction letter, repayment terms, privacy policy and loan agreement.
6. Only accept if the terms are suitable. Ensure you know how much you will receive, total repayment and when you need to repay.
The lender will have the final say on whether you are approved.
How to find a credible online lender
There are often lots of offers available for instant approval payday loans. However, ensure you take the following steps before providing any information.
Ensure the lender is credible. Check the bank/NBFC is regulated. If it is a digital lending app, ensure the relationship to the lender is correct by checking the official site. Read the loan agreement. Understand the interest rate, APR, fees, repayment terms and penalties. Be cautious if the app asks for unnecessary access to your contacts, call logs etc. Do not pay any upfront fees to someone or an unknown account in return for guaranteed approval. Avoid downloading any loan apps from unsolicited messages. Ensure there is clear information on how to contact the lender for any issues.
The Reserve Bank of India have provided guidance for consumers on digital lending. They encourage borrowers to check if the app is linked to a regulated bank or NBFC. You can check the official sources.
What are the alternatives to Instant Payday Loans?
Sometimes a short-term loan may not be the best option. Consider the below:
- Use any savings you have. If you have an emergency fund, you may want to use a small amount to avoid paying any interest or fees.
- Check if your employer can offer a salary advance.
- Ask if you can arrange to pay later.
- Compare other regulated credit options. You may have an eligible personal loan or other credit option that can be more manageable.
- Look at your expenses. If you are regularly experiencing a shortfall, you may want to look at your budget to see if you can reduce the pressure.
- Compare how much it will cost. Depending on how quickly you need the money, what options are available and if you can afford to repay, choose the right option for you.
Conclusion
An instant payday loan in India may be an option for eligible borrowers. Although applying online can be more convenient, ensure you consider the below:
Know what the eligibility criteria is, compare how much it will cost to borrow, ensure the lender is credible and that the repayment terms will fit with your budget. Do not be tempted by guaranteed approval and fast disbursement.
Most importantly, only borrow what you need and can afford to repay. Taking your time to review can help you make a more informed decision and reduce the pressure of repaying.