What is Payday Loan?
A payday loan is a fund provided to meet unexpected cash requirements before the salary of the month arrives. It is usually used to meet sudden unplanned expense requirements. These loans are provided for a very short term – usually for days unlike other forms of loans which are provided for years. It is a stop gap before the salary gets credited. Superior payday loan software which acts an all-in-one banking suite to manage short-term, high interest loans products like a payday loan, cash advance, etc. Payday loan software manages payday loans in one place. And this payday loan software increases the government security.
The payday loan market in India has been currently estimated at a whopping Rs 70,000 Crores and it is only going to go up. The demonetization drive last year gave a boost to the market as the common people approached the financial lenders to meet the cash crunch. NBFCs which plan to venture into this market will definitely gain in both short and long-term. The loan is becoming especially popular among the young generation whose lifestyle does not match their salary structure.
What is the process involved?
Although the concept of payday loans is not new, until recently, there were hardly any financial institutions which were providing payday loans. However, in the last two-three years, operators have emerged in this sector. Typically, these loans are offered by NBFCs.
As far the process is concerned, the payday loans are a fast source of money. From application to pay back, everything happens quickly. Often the fund is provided in a few minutes. It is ideal for emergencies and is often used for meeting excessive credit card usage, bounced cheques or even filling up bank overdrafts. Payday loans do not depend on the credit report. Though an assessment is made. All one needs to show is a valid id proof, income proof and submit a few post-dated cheques.
As mentioned above, payday loans are provided for an ultra short-term period. Typically, it has to be paid back within a maximum period of 30 days. However, some financial institutions increase the period for existing customers depending upon the repayment history.
The interest rates charged on payday loans is usually calculated on a daily basis and varies from one NBFC to another.
What are the challenges faced by Financial Institutions?
The lenders in the payday loans market, however, face certain challenges. Few of them are mentioned below:
Only people who have an emergency need opt for a pay loan and so the loan process ought to be lightning fast to ensure timely disbursal. It is needless to say that the technology has to be strong enough to support the faster processing of applications. However, not only do the software need to keep up the pace, but even servers have to be adequate to manage the pressure which keeps piling up every day.
Mitigating Credit Risks:
Mostly the borrowers who resort to payday loans are those with a bad credit history and low income. People who don’t have access to credit cards are forced to choose high-cost short-credit loans such as Payday loans.
As mentioned earlier, even people with bad credit score could get a chance of getting their payday loan application approved as the factors such as the borrower’s ability to repay the loan like employment and income play a more influential role than their credit score. This would give the borrower’s an opportunity to improve their credit score as well.
So, the credit risk assessment process has to be a little less stringent yet swift enough to ensure a quick loan lifecycle and powerful enough to mitigate the high risk involved in the payday loan process.
As payday loans don’t amortize, the interest for the loan for any given month ought to be calculated using the actual number of days between monthly payments. These calculations if handled manually or computed using excel sheets could make the entire process laborious and complicated.
So, the software product ought to be customizable to swiftly adapt to the credit policy while being capable enough to automate the calculation of pivotal loan parameters such as the interest rate, finance charges for the loan, etc.
Why CloudBankIN for Payday Loan Software?
CloudBankIN is a superior payday loan software which offers the luxury of an all-in-one loan lifecycle tool to manage your entire loan portfolio. Listed below are the major factors which make our payday loan software product suitable for any organization irrespective of its size:
- CloudBankIN robust auto decisioning engine which takes care of auto calculating important loan parameters like the finance charges, interest rate, late payment charges decreases the overall turnaround time of a payday loan.
- CloudBankIN could be seamlessly integrated with third party credit assessment engines to segment customer risk profile efficiently while ensuring a quick borrower evaluation cycle for instantaneous loan application processing.
- Our flexible financial software is completely customizable and allows the lenders to configure the rules-based engine to set unique credit rules, policies, scoring models, and workflows for different portfolio segments and loan products.
- CloudBankIN is much more than just a loan management software, it is an integrated banking suite with built-in accounting module, and business analytics engine makes a precise evaluation of the loan portfolio and gives in-depth insights to minimize the risk of default.
- CloudBankIN dynamic workflow management aspect helps the financial institutions not only streamline the loan process but also assist in keeping an eye on the performance and productivity of staff members and streamline the loan application.
Improve the performance of your payday loan software product, the productivity of your staff members and profit today with CloudBankIN. Way to success is just a click away. Click here to schedule a demo today.