Should You Take an Instant Loan from a Fintech Firm or Your Employer?

 

Many of us depend on our pay check for managing monthly expenses. A delay in salary credit is worrisome, as it may affect your financial planning. In such cases, you may look for a payday loan, which is a short-term loan taken for financial emergencies. Everyone faces a time when cash flow is restricted. The amount you require may be not big, thus a small cash loan works as best substitute for personal loan and likes.

Why Choose Small Cash Loan?

Below are the reasons as to why choose this loan facility.

  • A short-term loan can be utilized for any expenses and acts just like any unsecured loan. As a borrower, you do not have to submit collateral.
  • Documentation for such loans is easy. You will have to submit proof of income, bank statement, and salary slip, apart from the identity proof, residence proof, and recent passport-sized photographs.

Under small cash loan, you can borrow anywhere between Rs. 10,000 and Rs. 50,000. It is of a short tenure, between 30 days and 90 days. Benefit of this facility is quick disbursal, thus, often referred to as an instant loan, as disbursal happens usually within few hours of loan application. Instant loans are provided to salaried individuals than self-employed. It is because the loan amount finalized depends on the income profile of the person and the date of the pay check.

Usually, a short-tenure loan is provided by Fintech firms. However, employers today also offer such facility to employees who have a sound financial history. Choosing between the two can be better decided by understand the pros and cons of each of such providers. Here is a breakdown of a small cash loan by a fintech company and an employer-organization.

  1. Instant Loans by Employers

Some employers may give you advance paycheck. The amount will be calculated based on your services rendered for the period; you have to be compensated for. Not every organization is keen on giving advance payment of entire month, if you have not already rendered services in complete. They may either charge a tip for the same, or not.

Such facilities are usually provided to loyal employees who have been working for the organization for a good time now. Many companies today may mention the terms and condition about the service in employment letter. Employers-provided loans also act as traditional instant loans offered by financial institutions.

  • Eligibility Criteria:Employers will already have data of your income history. Thus, you need not submit any proof for it.
  • Deduction from Pay:Another facility is deducting of an amount from the paycheck, which has been credited as loan to the borrower. If you are using such facility, you may have to pay an additional convenience fee to the company.
  • Soft Loan:All these facilities may or may not be sealed in a loan agreement, but as an informal communication, such as over words or on email.
  • Interest Rate:Interest rate charged for loans by employers are lesser than that usually charged by fintech companies. This is why most choose employer-provided loans.
  • Reputation in the Company:Trust-factor often plays an important role if you are taking a loan from your employer. For instance, if you draw a good salary, but known to overspend or are not in agreeable terms with the company, then the employer may not sanction the loan or give advance paycheck.

While the process of loan from employers could be hassle-free and quick (disbursal in a few minutes), it has its own part of cons.

Instant Loans by Fintech Companies

Small cash or short-term loans are one of the leading financial products provided by Fintech companies today. Here, you can apply for a small amount loan by filling the loan application form, submitting required documents, and completing other formalities. The credit manager will review your loan application, and if meet the eligibility criteria regarding income, age, credit score, and have all documents in place, a loan amount will be sanctioned.

  • Loan Amount:There are times when you may be qualified for a loan amount lower than what you have applied for. This happens when you have lot many existing liabilities, low credit score, a payment cycle other than monthly or lower income than what is required for the loan. The company will sanction a loan amount and you will be able to borrow that amount or an amount lower than the same.
  • Disbursal:Disbursal can take a few hours but not more than 24 hours. Weekends and bank holidays may affect the disbursal process. But many provide funds even on weekends.
  • Fees and Charges:A loan processing charge will be applied. But there will be no hidden costs, complete transparency will be maintained.
  • Rate of Interest:The interest rate charged will be convenient. It will depend on the loan amount, tenure, your credit score and income profile.
  • Loan Agreement:There will be no informal process involved and a loan agreement will have to be signed.
  • Customer Support:You will receive excellent customer support and direct communication from the credit manager to ease the borrowing procedure.

Fintech Company vs. Employer Company

Instant loans from Fintech companies are better, if you want to keep your professional life unaffected by your spending habits and financial needs. Also, you can build your credit score by repaying in timely manner, which will help you further improve chances of taking a loan in future. Once you leave you employing-organization, it may no longer offer you a loan, but that is not the incident with Fintech firms.

But if you want to not look elsewhere and save time taken to compare the best providers for small cash loans in your city, then you can seek the funds from your employer company. They may have an eased eligibility criteria than the former.

Final Word

Thus, when making a choice between Fintech companies and your employer for taking an instant loan, you have to compare which works the best for you, and then decide accordingly from whom you shall borrow the funds

About the author:

. Follow him on Twitter / Facebook.