With a fixed income, a salaried person has many liabilities and responsibilities to take care of. With inflation and rising expenses, it is getting difficult for average salaried individuals to meet their daily needs, resulting in lesser investments and savings for the future. Hence, many people take personal loans to fewer additional financial obligations. At such a time, an advance loan on the salary might be beneficial to meet these monetary needs.
What is a salary advance loan?
A salary advance loan is a short-term, unsecured personal loan. As the name suggests, it is the advance given against the salary. The borrower can avail salary advance loan three times of their monthly salary. The loan tenure is between 12 and 15 months. A salary advance loan is easier to get than a personal loan. A person with a moderate credit score can also avail of this loan.
Eligibility requirements for a salary advance loan
- The applicant should be an Indian citizen
- The minimum age of the applicant should be 25 years
- The applicant should be drawing a monthly salary of INR 30,000 or more
- The applicant needs to submit their PAN card, complete the Know Your Customer (KYC) procedure, and share their address proof with the lender
- The applicant should have an active bank account and provide its details to the lender
How to opt for an Online Salary Advance Loan
Applying for this loan is a simple process. Here’s how an applicant can opt for an online salary advance loan.
- Fill out the application form: The applicant is required to provide professional and personal information.
- Wait for approval: Once the application form is filled out, it will be scrutinised by the bank or financial institution where the loan is applied for. Once the lender approves the applicant, the applicant needs to submit the necessary documents.
- Submit KYC documents: The applicant needs to submit the following KYC documents via email or upload them online to the lender’s portal:
- ID proof: Voter ID, passport, aadhaar card or driving licence
- Proof of age: Birth certificate, passport or driving licence
- Address proof: Rental agreement, telephone or internet bill, ration card or passport
- Proof of income: Bank statement with a salary for the last three months. If the applicant has switched a job, they will need to submit the appointment letter from the recent employer/Form 16/salary slips of the last one year
- Employment details: Employee ID card or visiting card
- Specimen signature: A signature along with a document to compare it with. This could be a passport/aadhaar card/bank verification letter
- Photographs: Passport-size photographs
- Disbursement of the loan: After verification of all the documents, the loan amount will be processed and directly credited to the applicant’s salary account/business account.
Features of an advance salary loan
- Salary advance loan interest rate is between 1.5% and 3% per month
- The loan amount ranges from INR 5,000 to INR 2 lakh
- Loan tenure is usually between three months and three years
- Approval takes between a few minutes and a few hours
- The amount is disbursed between 5 and 48 hours
- The lender fixes the loan amount and tenure depending on the applicant’s credibility by taking factors like salary, any existing loan, employment stability, and credit score into account
Salary advance loan benefits
- It has a simple application procedure. Due to it being an online and paperless process, the loan is disbursed within a few hours of applying for the loan. This comes as a last resort for people looking at the emergency fund.
- It is an unsecured loan, so no collateral is required for processing.
- It has a short-tenure loan ranging between 12 and 15 months, ensuring fast repayment and lesser EMIs.
- It requires a moderate CIBIL score.
- It has minimal or zero pre-closure charges.
Downsides to salary advance loan
- Salary advance loan interest rates might be high. Most of the borrowers end up paying 24 to 30% per annum, which is much higher than the rate of interest on a personal loan.
- Applicants get this loan easily, and hence, may end up borrowing higher amounts than needed. Moreover, there is a high possibility of them taking these loans frequently.
Although the salary advance loan benefits are numerous, financial assistance should not be taken unless necessary and unavoidable. While availing of the loan, one should not overlook the high interest they will be paying. Before taking a salary advance loan, one should be well informed so that they do not end up falling into debt.