Payday Loans Emerging As Nascent Market in India
Payday loans are decried a scourge, a menace and our dubbed “loan sharks” in the US and UK. With very high interest rates of 45%-50%, payday loans are given in advance of the next pay cheque and cater to blue collar workers, who are paid on a weekly basis. In India, payday loans are at a nascent stage and just taking off with a host of startups like RupeeLend, MoneyinMinutes, QuickCredit, Money4You.
But payday loans in India will be a different proposition, say startups. For one, they cater to a highly mobile, young, aspiring population, unlike in the US were it caters to low-income households and those living from one pay cheque to the other. Secondly, startups in India are using technology to asses loan eligibility and interest rates, unlike in the West were payday loans are synonymous with pawn lenders and being caught in the debt trap.
“Payday loans are a relatively new market in India. We earlier had the brick and motor version of payday loans in India in only one category – gold loans. But today technology is proving a leveller for young professionals to access short-term loans at interest rates lower than what credit card companies typically charge,” said Nikhil Sama, CEO, InstaPaisa.