Have you ever faced a cash crunch at the end of the month? Or perhaps even 10 days before it? While it is not an ideal situation to face a shortage, this commonly happens to salaried individuals. On such occasions, wouldn’t it be easier if there was a credit that one could avail? Enter, Advance Salary Loans.
Advance Salary Loans at a Glimpse
Advance Salary Loans are a scheme that you can avail of at any time in a month. They can be paid back as monthly installments after actual pay over a set period. These are small-ticket and short-term by nature and are given in amounts ranging from INR 5,000 to INR 1 lakh. These loans are meant to take care of last-minute or unexpected expenses, and they come in handy for individuals who are on a budget. In a nutshell, they are short-term loans and bag names such as salary advance loans.
Advance Salary loans are a 5-year-old phenomenon that began since the advent of fintech. In practice, the loans are disbursed by NBFCs in most cases where individuals with extra funds can lend to individuals running short of cash or credit. That said, you can look forward to a 20-50% Annual Percentage Rate (APR) depending on the lender, the ticket size of the loan, tenure, etc.
The Pros and Cons
Advance Salary Loan does away with the traditional method of acquiring cash – swiping your credit card. You get to avail of credit or salary that is 1x-3x the amount of your net salary. Advance salary loans come with prepayment facilities and allow you to prepay your outstanding amount partly or wholly, as may be stated by your lender.
The sheen of it all is the quick approval and instant disbursal of loans that allow the borrowers to receive the amount in 24 hours as this expeditious facility will enable you to meet last-minute financial requirements and help you avert financial constraints. While Advance Loans may have overhead charges such as documentation fees, legal fees, etc., for which app-based lending recently garnered media flak, Advance Salary Loans can be immensely helpful given that the borrower pays attention to details while reading the terms and conditions.
People also gravitate towards Advance Salary Loans since it does not require heavy documentation like traditional financial services, making it a big hit with people who need instant funds and do not have the time-bandwidth to go through conventional borrowing from traditional lenders.
Furthermore, flexible payment terms make Advance Loan enormously convenient to apply and repay. You can pursue convenient EMIs that suit your budget plan. You can pick a tenure best suited to your profile. The repayment timeframe offered ranges from three months to 12 months.
On the other hand, some cons may also apply since some customers are prone to over-borrowing. They lose sight of the repayment duties and decide to solve multiple financial problems with the same loan, thereby getting stuck in a debt cycle in the end. Also, some issues may lie in terms of tenure. Advance Loans also pose the challenge of more issues for less cash inflow as the small tenure means a higher EMI which in turn results in higher cash outflow with a substantial amount going to debt repayments.
How to Avail an Advance Loan
The application method for the said loans is where it gets user-friendly and straightforward, a facility that new-age FinTech start-ups seek to bring into vogue by offering cutting-edge solutions. Approval and disbursal take place online with a simple application, which you can complete without assistance. In the meantime, the loan you applied for will be approved after taking into account your credit history, basic salary, company as well as current obligations. Moreover, new-age lenders also evaluate your creditworthiness using various alternate data and digital footprints to process the application and sanction the loan quickly. And recovery is facilitated via the EMI route.
The majority of lenders pursue a similar system when it comes to application. The general approach is to fill out the online application form (or a hard copy of the same from the nearest branch office) that, among others, will include your essential financial information – personal and professional details as well as details of income. The application form will also contain information about the amount of loan you require and the reason for the same.
Advance Salary Loans are all about bridging the credit gap that hinders low-income communities from availing loans. To that end, emerging FinTech players are particularly committed to ushering in financial exclusivity by offering a personalized and customer-friendly package for those falling within the salary bracket of more than Rs 10,000.
Customers can register with their basic KYC and upload necessary documents online, thereby evading the traditionally cumbersome process and availing loans instantly. While Advanced Salary Loans are immensely beneficial, customers must be wary of over-borrowing. New-age lenders are now working towards a more comprehensive and robust solution with longer tenures and larger ticket sizes, making it mutually beneficial with a reduced burden on the borrowers. As long as customers don’t over-borrow, fail to repay the loans, and are cautious, Advance Salary Loans can be a welcome respite for salaried individuals in times of need.
The author, Abhishek Soni, is CEO and Co-Founder at Upwards. The views expressed are personal
(Edited by : Anshul)