Many of us face an emergency where we require a small payday loan on the same day. Such a situation can arise in the case of a medical emergency, financial opportunity or other necessary work, which needs to be fulfilled at the earliest. Getting a loan within a short time (24-48 hours) is not only difficult but extreme monotonous, especially from banks who require several weeks to sanction your personal loan application.
In such an hour of crisis, most people be forced to go to a money lender in the informal market who provides loans at very high interest rates. Moreover, you sometimes need to provide security in the form of gold jewelry or other expensive assets to get this type of loan, which can turn out to be a humiliating and degrading experience. You can also borrow money from a friend which sometimes become awkward and might jeopardize your relationship with your friend due to this, but in desperate times you don’t have much options to look for.
With Digital Finance revolution, fortunately, all products and services are available online and the transactions are pretty safe. You can purchase any product online and can even pay for it when it reaches your doorstep by using the cash on delivery option. It is similar for online payday loans, you need to apply online and fax all the documents when required and the loan amount will be delivered to your doorstep or transferred to your bank account. You will be charged a fee and an interest rate at the day of disbursement, also different rates if you want to extend your loan agreement. However, if you are unemployed and do not have a credit history, it is very difficult to get a loan online as most websites do a credit check but they won’t reject your application the basis of bad credit score, that’s the best part about online loan service providers. But if you have credit score of more than 700 on CIBIL, it becomes easy to get a payday loan rather than a person having bad credit score or no credit at all.
In India, emergency cash loans are a very new concept. Since they are short-term unsecured loans usually given in cash for meeting short term financial requirements, the rates of interest depends wholly on the discretion of the lenders and sometimes they charge extreme high rates for their own profit as they know that people will avail these services at the time of urgent situations.
As per the Tracxn report on alternative lending in India, a number of start-ups in the online consumer lending space has grown enormously from merely 2 in 2013 to 30 in 2015. These firms either operate as NBFCs or serve as a P2P lending marketplace to connect individual borrowers and lenders directly. By using a software and wide variety of non-traditional data to evaluate credit risk, these start-ups are able to verify the identity of an individual and determine their intent and capability to repay a loan. P2P firms offer customers scope for negotiation of interest rates, enable borrowers to obtain capital at a lower cost possible at the earliest hour while providing investors an opportunity to earn lucrative returns as they charge registration fee as well as commission from both lenders and borrowers.