A payday loan is an unsecured short term loan extended to the borrower at relatively high-interest rates. The term is also coined as a salary loan or payroll loan as it is given between two paychecks of the borrower. The loan is required to be repaid before or on the day the next salary is credited.
The popularity of Payday loans
Payday loans are particularly popular in countries like the United States of America, Canada, Australia and the United Kingdom. The easy availability of the loan makes it a preferred choice among the customers.
Different aspects of Payday loan
- The loan amount is in the ratio of the salary of the borrower.
- Since it is an unsecured loan the interest rate is high.
- The tenure of the loan ranges from two weeks to one month.
- Quick and simple disbursement.
- It meets the immediate requirement of the borrower.
- The loan can be applied online.
- The loan is transferred directly to the Bank account of the borrower.
- It takes a few hours to one day to complete the process.
Loan process involves applying online. The borrower also has to upload certain documents along with the application. These documents include
- Identity Proof of the borrower.
- Address Proof
- Bank Statement
- Salary Statement
All these documents are verified by the lender before advancing the loan amount. The amount to be sanctioned is at the discretion of the lender. It may not always be in accordance to the amount applied for, by the borrower.
Suggestions for the borrowers of payday loan
-Always explore different alternatives before availing the loan. There may be lenders offering lower interest rate.
– Avail online loan facility. This ensures an error-free, speedy process. The details are filled by the borrower himself, so the chances of mistakes are very less.
– Borrow from a reliable source. Check for the credibility of the lender in the market.
– It is a good practice if we pay our debts on time. This will ensure that we can avail a loan in future if we have the requirement. The lender checks the credit score of the borrowers before lending money. It is necessary that the borrower has a good credit score and is free from defaults in payment of loans.
Payday loans are an excellent option for lower and middle-income groups who are in the dearth of finances. However, the borrower must maintain a good track record to avail these loans according to his/ her requirement and repays timely.