Sometimes you can find yourself in situations where you need unexpected funds. Whether you require money for medical bills, urgent home repairs, travel costs, or other essential costs you might not have enough savings to hand. Some salary earners will consider taking out a short term loan.
A short term salary payday loan can help eligible applicants with their immediate needs. Depending on the lender, you may be able to apply online, provide documentation on your income and identity, and then have your application assessed.
However, there are several things to consider before applying for a salary day loan such as eligibility, interest rates, fees, repayment terms and how it can affect your monthly budget.
This article will explain how salary payday loans work in India, who can qualify, what documentation is usually required and what to consider.
What Is A Salary Payday Loan?
A short term salary payday loan can help salary earners with their essential costs until they receive their next salary. It is intended to be used for short term needs.
For example, if you are expecting to receive your salary in five days but require funds today for an unexpected medical bill and do not have enough savings, you may want to consider taking out a short term loan. As long as the total cost of borrowing plus repayment terms are manageable.
This will depend on the lender you choose. Some may offer a personal loan whilst others will offer a short term loan.
Before applying, ensure you know:
- How much you are borrowing in total.
- The interest rate and APR.
- Any processing fees.
- When you need to repay and how.
- What will happen if you fail to repay.
A salary payday loan should only be considered once you have taken all of this into consideration.
How Do Salary Payday Loans Work In India?
Depending on the lender you could apply for a salary loan online. Usually, you should:
Choose A Suitable Loan
Find a loan that suits your needs. Only borrow what you need.
Apply For The Loan
Complete the application form with your personal, employment and income details. Depending on the lender, you may be asked for details about your monthly salary, employer and bank account.
Verify Your Identity, Employment Details, Income & Repayment Ability
Your identity, employment details, income and ability to repay may be verified by the lender. This will depend on the lender.
Review The Loan Offer
Once your application has been approved, carefully review the loan offer. Ensure you know:
- How much you are borrowing.
- The interest rate and APR.
- Any processing fees.
- When you need to repay.
- What will happen if you fail to repay.
Only accept the offer once you know how much you will be repaying.
Receive The Loan & Repay
Once your application has been approved and you have accepted the terms of the loan, you will receive your funds. Ensure you repay on the agreed dates and that the instalment fits into your budget.
Important: Just because you complete an online application doesn’t mean you will be approved immediately. This will depend on the lender.
Who Can Get An Instant Payday Loan For Salaried Individuals?
An instant payday loan for salary earners may be an option to consider. However, this will depend on the lender and your circumstances.
Generally, you will need to:
Have A Regular Income
You will usually need to prove you have a regular income. Having a regular salary will help the lender determine if you can repay.
Employment History
Some lenders may look at your employment history, how long you’ve been in a role, and your employer.
Age Requirements
You must meet the minimum and maximum age requirements set by the lender. This will depend on the product.
Credit History
The lender may look at your credit history and repayment history. If you currently have defaults, large amounts owed, or have applied for several credits recently this may affect your application.
However, this will depend on how the lender determines your application.
Bank Account & Income Proof
You may need to have an active bank account. You may also be asked for proof of your salary/employment.
Ability To Repay
The lender may look at how much you currently owe in EMIs, household costs, debts and how much you earn per month.
Even if you meet the basic criteria, this does not guarantee you will be approved. Ensure you check what the lender requires.
What Documentation Is Needed?
The documentation needed will depend on the lender, amount being borrowed and verification requirements.
Below are examples of commonly requested documents:
| Document | Purpose |
|---|---|
| PAN card | To prove your identity and financials if required. |
| Aadhaar or other accepted ID | To prove your identity and address if required. |
| Recent salary slips | To prove you have an income from employment. |
| Bank statements | To determine how much salary you receive. |
| Employment details | To verify your employer and role. |
| Bank account details | To arrange the loan. |
Not everyone will be asked for all of the documents. Some lenders may ask for more information or use approved verification methods online. Only provide your documents through the official lender website or approved application. Ensure you understand how your personal information will be used by reading the privacy policy.
Interest Rates & Fees
One of the most important factors to consider is how much you will be paying to borrow.
Just because you have a short repayment period does not mean you won’t pay much. Depending on the interest rate, fees and repayment terms you could pay a lot.
Interest Rate
The interest rate will determine how much interest you’ll pay on your loan. This will depend on the lender, product, borrower and terms.
Ensure you understand how much you’re really paying to borrow.
Processing Fees
Some lenders will charge a processing fee to assess and process your loan. This could be a fixed fee or a percentage. Ensure you know if any taxes apply.
Annual Percentage Rate (APR)
The APR will show you how much you’ll pay per year. This includes interest and some fees.
If you’re applying for a digital product that falls under the relevant Reserve Bank of India directions, the lender must tell you what APR applies. They should also provide you with a Key Facts Statement (KFS) before you sign the loan contract.
Ensure you understand what you’re paying by reading the KFS.
Late Payment Fees
If you fail to pay on time you could be charged additional fees. This could also affect your credit history if reported to credit information companies.
Ensure you know what fees apply.
How To Choose The Right Salary Day Loan
When looking for a salary day loan, you should ensure it suits your needs. You shouldn’t get into further issues by borrowing.
Consider:
How Much You Are Repaying
Ensure you know how much you’ll be repaying. Sometimes a smaller loan with clear terms would suit you better.
Repayment Terms
Ensure you know when you need to repay, how many instalments you’ll need to make and how.
If you have to repay straight after receiving your salary, ensure you know how much you’ll have left for rent, food, bills, transport and other essential costs.
Verify The Lender
Ensure you know who the real lender is. If you’re using a digital lending platform or lending service provider, ensure you know who the regulated lender is.
The Reserve Bank of India will have information on regulations. This can help you understand what protections are in place for borrowers.
Read The Contract
Ensure you read through the loan contract and KFS. Ensure you understand what interest, fees, repayments, cooling off period (if applicable) and complaint handling will apply.
Don’t Borrow More Than You Need
Only borrow what you need and can afford to repay. Don’t take out a new loan to repay an existing short term loan unless you’ve carefully considered the costs.
Related to read: Instant Payday Loan India
When Should I Consider An Advance Salary Payday Loan?
An advance salary payday loan may be something to consider if you have essential costs to pay before you receive your salary and don’t have enough savings.
Examples could include:
- Medical costs.
- Urgent home or vehicle repairs.
- Essential travel.
- Gaps between your salary and bills.
- Other essential costs that cannot be delayed.
However, borrowing may not always be the best option.
If your employer offers salary advances, ensure you know what the terms are. It may be cheaper to use your emergency savings, negotiate a payment date or speak to your service provider.
Don’t borrow to pay for unnecessary items or regular costs that are consistently more than you earn.
Salary Payday Loan Vs Salary Advance
Whilst they may sound similar, a salary advance and salary payday loan can be different.
| Feature | Salary Advance | Salary Payday Loan |
|---|---|---|
| Where Funds Come From | Usually from your employer | From a bank, NBFC or other eligible lender. |
| Repayment | Could be taken from salary in future. | Depending on the loan terms. |
| Interest & Fees | Will depend on the employer’s policy. | Will depend on the lender’s terms. |
| Eligibility | Will depend on the employer’s policy. | Will depend on the lender’s eligibility. |
| Application | Usually from the employer. | May be available online or offline. |
It will depend on the lender. Some salary advances may be free of charge whilst others may have conditions. Not all short term loans will be a payday loan.
Compare the actual terms.
Top Tips To Help With Costs Before Payday
If you regularly run out of money before payday, you could try looking at your monthly budget to help reduce reliance on short term loans.
Track Your Monthly Costs
Keep track of your regular costs such as rent, food, electricity, transport, subscriptions and loan repayments. This will help you see where your salary is going.
Build Up An Emergency Fund
Try to save a small amount from your salary each month. Even a small amount can help with unexpected costs.
Plan When To Pay Your Bills
List out what you need to pay and when. If possible, ensure you’re paying them on the same date as your salary.
Look At Your Debt
Work out how much you’re paying each month towards your EMIs, credit cards and other borrowing. If you’re struggling as you’re paying a large amount towards your repayments, look at your budget.
Only Borrow If You Have To
Before applying for a loan, ensure you can delay, reduce or find a cheaper way to deal with the cost.
Responsible borrowing starts with understanding why you need to borrow and how much you’ll be paying back.
Conclusion
A salary payday loan can help salary earners with unexpected costs. However, borrowing should always be done with an understanding of the costs involved.
Before applying for a salary payday loan in India, ensure you compare what’s available, know what the lender requires for eligibility, what APR and fees apply and whether you can comfortably repay within your monthly budget.
When considering a salary day loan, instant payday loan for salary earners or advance salary payday loan, the most important thing is to choose an option that will help with your immediate needs without causing any extra stress.