Imagine a situation where you are in an urgent need of money. What would be your natural response? You’d look for the easiest way out, well maybe a personal loan or you’d have your all-time friend, credit card. A wiser option would be opting for a personal loan as there are a variety of debts that are available today that too with favourable terms of repayment. Going for credit cards and payday loans is like sticking to the same restaurant and eating the same food again and again, while you could have just walked down the corner to another block and explored a new set of restaurants, which serve better food with great ambiance. In this case, these new restaurants are Personal overdrafts or Advance Salary loans.
What are Advance Salary loans?
The basic idea of a salary advance loan is defined in its name itself. It is a small amount of money lent to a borrower against his or her salary. It is usually an extension against the salary account of the borrower. The loan amount is in multiples of the monthly salary earned. This type of personal loan demands a comparatively higher rate of interest. The loan tenure of an advance salary loan is lower, somewhere between 6 to 12 months. The loan period is quite short and the amount is based on the salary of the employee. Since it is easy to obtain, people do not look out for other easier options.
Features of an Advance salary loan
Listed below are the key feature of a salary advance that will help you understand the form of debt which is best suited for your short-term cash needs -
Interest rate
The interest rate applicable on an advance salary loan is comparatively on the higher side. Consider a situation when you have taken a loan of Rs 10,000 and you pay Rs 15000 at the end of it. That is what happens in the case of payday loans. It being a short-term loan it demands different deliverables as compared to other personal loans.
Nature of the loan
Advance Salary loans are short-term in nature, which means the usual period is 6 to 12 months. With high-interest rates and short term repayment, an advance salary loan is a good option only for short-term needs. Nowadays, most lenders offer flexible repayment options on short term personal loans like this one.
Principal amount
In advance salary loans, the amount that can be borrowed is considerably low as compared to overdrafts and other personal loans. An amount of Rs 25,000 to Rs 2,00,000 is what you have at your disposal. This makes it easier for the borrower to meet his or her cash requirements and close the loan in a short amount of time.
Other Charges
Thus, an advance salary loan is a good option in order to meet short-term cash requirements and close the loan as soon as possible. It helps impact the credit report positively as you can successfully service and close your loan in a short time.
