Payday Loans for those with Bad Credit

Credit score has become an integral part of your credit life. Whether you accept it or not, bad credit has a lot of impact on your life. From rejected loan applications to higher rate of interest or a higher downpayment, anything is possible. And of late, credit score has also started to affect your employment opportunities. This is already being done by certain employers like those in regulatory roles like IRDAI and SEBI. This trend is only picking up traction with more and more employers asking for credit reports of prospective employees.

The period of a month end is particularly tough one for the salaried lot. Without a proper budget, it is easy to run out of cash by the 2nd half of the month when individuals either look at their friends or family or the unorganized sector for sailing through the other half of the month till salary gets credited again.

A full-fledged personal loan may come at a high rate of interest considering the bad credit score. So is going to the unorganized sector the only way forward for a salaried individual looking for some extra cash?

CreditMantri, as your credit coach is always at your service and keeps abreast with the latest products launched in the world of credit and makes a wonderful job of matching the needs of various individuals with the right credit product, thereby making it a win-win situation for our clients.

Through this post of ours, we discuss the availability of Payday loans for individuals with bad credit.

What are Payday Loans?

The first question that you might have on your mind is what do payday loans stand for? Payday loans are new-age loans lent by Fintech lenders that go on to plug the cash crunch that you may face at any time during the month. There may be some emergency situations that can wipe out the entire amount credited much before the end of the month.

To cater to such needs of individuals, many companies have come in with loans that are called Payday Loans or Salary Advance loans. They are basically very short-term unsecured loans that are made available in a very short period of time. As these loans are lent by fintech lenders, they do not give that high a priority to your credit scores, which makes it easier for individuals with bad credit also to avail these loans.

Instead of credit score, these fintech lenders make use of data sourced from your digital imprint like social media profiles, shopping on websites, etc. Coupled with Artificial Intelligence, these data points aid the lenders in making their lending decision.

These loans can be availed till the time your salary is credited or any shorter period. Interest on these loans is charged on a daily/monthly basis.

What are the Advantages of Payday Loans?

• Ease of accessibility

  Payday loans can be easily accessed by anyone with an App or on the website of the fintech lenders. There is no need to visit the branches of any lender.

• Minimal Documentation

  Payday loans are loans made available by modern day lenders and hence, require minimal documentation. Often it is just the salary statement and identity and residential proof that is required. You need not run around for photocopies of these documents. A scanned copy of the documents can be easily uploaded on the app or website.

• Faster Disbursal

  A personal loan, which is an unsecured loan is one of the easiest loans to avail with the least amount of documentation. This loan could also take anywhere between 2-4 days to a week for disbursal depending upon other factors. In contrast, the payday loans are immediately transferred into your bank account. Some lenders also allow you to shop with their partners and pay with no cost EMIs. One of the Payday lenders, EarlySalary, is in the process of launching a RuPay card which acts like a Debit Card, making paying for your needs extremely easy.

• Allows Dynamic Borrowing Limits

  These fintech lenders are in sync with your repayment patterns and if you show instances of being responsible with credit, the next time your borrowing limit may be increased.

  For Example: If for the first time you are allowed to borrow 50% of your salary and demonstrate on-time payment, you may be allowed higher limits of 70-80% the next time.

• Amount borrowed can be used for any purpose

  There is no restriction on the usage of this borrowed money. It could be put into any use as desired by the borrower.

• No foreclosure charges

  As with personal loans, there are no foreclosure charges on a Payday loan. You can choose to repay the loan as and when you wish without incurring any penalty.

Disadvantages of a Payday Loan

Higher Rates of Interest

Payday loans prove extremely convenient and are available even to those with bad credit score. However, when you look at the interest charged by these lenders, they work out quite high.

Easy Availability of Loans May Lead into a Debt Trap

These loans are quite easily available which may prompt an individual to avail these loans quite often and before you realize it may develop into a habit. Such situations may lead an individual towards a debt trap which might prove difficult to get out of.

Not Suitable to Self-Employed Individuals

Payday loans are catered to meet the cash crunch of salaried individuals. So these loans do not meet the needs of self-employed individuals or entrepreneurs who may not be availing a paycheck at the end of each month.

Earlier Repayment is the Key to Keeping These Loans Cost-effective

The earlier an individual is able to repay these loans, the overall cost of the loan remains low. Or this kind of a loan proves very expensive to avail.

Procedure for Availing Payday Loans

Availing of Payday Loans involves a simple uncomplicated process.

• Download the App of the Lender
• Fill in a simple application with personal details
• Mention the amount required
• Upload documents
• The lender carries out a check of your documents and uses data to determine how much they could lend to you.
• Money credited into your account

CreditMantri has a tie-up with multiple lenders that offer payday loans. You can avail a Salary Advance or a Payday Loan right here from our website.

End Note

Payday loans do come across as a convenient way of availing a loan especially for those who have bad credit score. However, you may want to weigh in on the high cost of availing these loans too before making the decision for availing these loans.