Payday loans are also known as instant loans. These are short-term, unsecured loans available to salaried individuals and must be repaid once the borrower receives his/her paycheck. These are mostly unsecured loans as they do not require collateral. Here are some of the main features of payday loans:
- Collateral-free – Payday loans are unsecured, meaning borrowers can avail of the loan without offering an asset as collateral to the lender.
- No Need for Credit Score – Most lending institutions do not require an applicant’s credit score or credit profile before granting this loan. Therefore, borrowers can avail of a payday loan even if they have no credit history.
- Minimal Documentation - Payday loans do not require exhaustive documentation. However, banks and lenders may verify documents related financial, employment, and personal profile of the applicant.
- Short Tenure - Payday loans are mostly short-term. Individuals must repay this loan amount within 15-30 days from the start of the payday loan.
- No Restriction on Usage - Payday loans do not have any specific usage requirements from borrowers. Thus, individuals can use it for planned and unplanned expenses.
- Faster Approval & Processing - Payday loan acts as instant financing. After the initial verification is done around employment and related documents, individuals can get an instant cash loan, sometimes within 1 hour. This loan acts as an emergency fund that is available on the same day to cover any urgent financial expenses.
Since payday loans are mostly unsecured, they can be easily availed by any borrower who also does not have a credit history.