A loan can be an excellent solution to manage both large and small expenses. Traditionally, borrowers in India had limited access to quick credit, often relying on high-interest loans from banks or informal lenders. However, with growing financial awareness and the rise of digital lending platforms, more accessible and affordable options are now available.
One such option is instant payday loans, which are short-term loans designed to cover urgent expenses until your next salary. These loans offer quick approval, minimal documentation, and fast disbursal—making them ideal for emergency situations like medical bills or utility payments.
The popularity of payday loans in India has grown due to their ease of access and suitability for salaried individuals in need of immediate financial assistance. They help bridge temporary cash gaps without the hassle of long application processes or rigid credit checks.
Payday loan
Payday loans, also referred to as “advance cash”, are a type of short-term unsecured loan designed to help salaried individuals meet urgent expenses before their next paycheck. These loans are best suited for working professionals who might need quick access to funds for emergencies such as medical bills, utility payments, or unplanned travel.
The payday meaning stems from its purpose—helping you cover your costs until your upcoming salary day. The loan amount is usually a small portion of your monthly income, and applicants are often required to submit recent salary slips or proof of income when applying.
Since payday loans fall under the category of unsecured loans, they do not require collateral. However, due to the higher risk involved for the lender, these loans typically come with high interest rates and shorter repayment tenures.
If you need urgent funds and meet the basic salary criteria, you can easily apply for a payday loan online through digital lending platforms that offer quick approval and instant disbursal, often within hours.
How do Payday loans work?
Payday loans are short-term, high-interest loans typically repaid on the borrower's next payday. Borrowers provide a post-dated check or authorize electronic withdrawal for the loan amount plus fees. They're accessible to individuals with poor credit or no credit history and usually don't require collateral. However, they come with high fees and interest rates, often trapping borrowers in cycles of debt.
Benefits of Payday loans
- Quick access to funds
Instant payday loans online offer rapid disbursal, making them ideal for emergencies like sudden medical bills or home repairs. Funds are usually credited within a few hours of approval. - No collateral needed
As unsecured credit options, payday loans don’t require assets or security. This makes them accessible to individuals who may not qualify for traditional loans. - Minimal documentation
Applicants typically only need to submit basic documents like ID proof, address proof, and salary slips to qualify for a payday advance. - Suitable for low credit scores
Payday lenders may consider borrowers with lower credit scores, offering a lifeline when traditional banks reject applications. - Short-term flexibility
These loans are repaid on the borrower’s next payday, making them a temporary financial cushion until regular income resumes.
Risks associated with Payday loans
The primary risk of payday loans is their high cost, with annual percentage rates (APRs) often exceeding 400%. Borrowers can easily become trapped in debt cycles, continually renewing loans due to their inability to repay, leading to long-term financial hardship. Additionally, the short repayment term and lump-sum repayment structure can strain borrowers' budgets, leading to further financial instability.
Personal loan
Personal loans are among the most flexible financing options available in market, which do not require any collateral or security. These loans do not have end-use restrictions and can be used for almost any purpose. For an instance, you may use a personal loan for renovating your home, paying medical bills, planning a dream wedding, or consolidating your debts. Lenders look at your credit history, income, and other factors before approving a personal loan. The approved funds must be repaid by the borrower over the pre-set tenure, typically with interest.
Personal loans come with a host of benefits including quick disbursal, flexible tenure options, minimal documentation, and no hidden charges. You can also use a personal loan EMI calculator to know your monthly EMIs in advance. It can also help you figure out what payment amount and interest rate will work best for your budget.
Let us understand the distinction between a payday loan and a personal loan. It will help you make a better long-term financial decision.
Payday loan vs Personal loan
Loan amount: Personal loans are available with larger loan amounts. Although the maximum loan amount differs from lender to lender, with a Bajaj Finance Personal Loan you can borrow funds of up to Rs. 55 lakh.
Tenure: The tenure of a personal loan is usually much longer than that of a payday loan. For instance, Bajaj Finance offers a tenure ranging from 12 months to 96 months. On the other hand, payday loans must be paid back between two and four weeks after the borrower gets the advance.
Documents required: When it comes to personal loans, you must submit KYC documents, bank statements, evidence of income, and other personal loan eligibility documents. Payday loans require the applicant to submit their pay slips and meet the basic requirements by the lender.
Credit Score: Payday loans and personal loans are very different from each other when it comes to credit score. Payday loans usually do not emphasise on the credit score. Payday lenders do not report to credit bureaus, therefore getting a payday loan does not affect a borrower's credit score directly.
Contrarily, borrowers who make their personal loan payments can enhance their credit score through timely repayments.
Payday loans are more expensive and riskier for the lender than personal loans. With a personal loan you can borrow a higher loan amount, which you can repay over the longer tenure at a personal loan interest rate.
Bajaj Finance provides personal loans of up to Rs. 55 lakh which can be disbursed into your account in as little as 24 hours*.
