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Last updated June 17, 2024
Jane, a sales officer in Oyo State, juggles her daily expenses and survival on a measly sum of money. Suddenly, an unexpected financial need pops up—a broken refrigerator—so she needs urgent cash to replace it. Stressed and unsure of what to do, Jane confided in her best friend, Feyi. Feyi, always the problem-solver, suggested she get a payday loan from Irorun, a service he had found quick and reliable.
Payday loans, like the one Feyi recommended, have been around for ages because people often need salary advances to handle sudden expenses. These loans are closely tied to the borrower’s cash flow, making them a practical option for many. They offer a lifeline in situations like Jane’s, allowing individuals to meet urgent financial needs until their next paycheck.
In Nigeria, payday loans are common. Companies like ALAT by Wema, Access Bank, Irorun, and Essential Finance provide significant loans to federal workers. So, what exactly is a payday loan, and what kind of software would a lender need to set it up?
Payday loans are short-term loans that help borrowers bridge the gap between paychecks. Essentially, a Payday loan is any loan that’s tied to a salary date. These loans are typically repaid on the borrower’s next paycheck day. Proper loan management software (LMS) is necessary for lenders wanting to offer payday loans. The LMS efficiently handles loan applications, credit checks, disbursements, and repayments.
Now, let’s take a look at some things to consider when setting up payday loan software:
Featured read: What are payday loans and how to make the best of them?
Here are seven significant considerations you shouldn’t overlook before launching your payday loan business:
When setting up payday loan software, you must focus on salaried workers. This means tailoring your software specifically to the needs and circumstances of the working class. Your platform should include robust features to verify employment status, confirm salary details, and validate the legitimacy of their job. This ensures that loans are granted to individuals who can reliably repay, minimizing the risk of default. Find out other examples of low-risk borrower categories.
A payday loan software should be capable of managing pre-qualified loans. For instance, if you partner with a company’s Human Resources (HR) department, you might have access to their employees’ names and data. This allows you to pre-qualify these customers based on their earning capacity, creditworthiness, and overall financial health. At Lendsqr, we refer to this as Whitelist, but globally, it’s known as pre-qualification. Interestingly, you can modify your chosen pre-qualification attribute to suit your business needs. Find out more about Lendsqr’s Whitelist feature.
Robust Know Your Customer (KYC) checks help verify the identity and authenticity of borrowers, reducing the risk of fraud and ensuring that loans are granted to legitimate individuals. Integrating payday loan software with HR platforms can enhance these checks. For example, if Ade John Sule claims to work at XYZ Ltd with employment number 123, your software should automatically verify this information. See how you can beef up your KYC with Lendsqr.
A payday loan software should also be able to pre-qualify some reputable companies, so you know a company and are familiar with the authenticity of the employees.This way, the system can automatically approve employees for loans based on the credibility of their affiliated company. This way, the system can automatically approve employees for loans based on the credibility of their affiliated company.
Payday loan software should allow you to set a loan product such that no matter when a borrower takes a loan; the loan is automatically set for the day of salary payment or the day after. See how to configure a loan product on Lendsqr.
Your software should be able to integrate with HR platforms. Speaking of which, Lendsqr has successfully integrated with Bento, one of the largest emerging HR SaaS platforms. It has evolved to have thousands of companies on its platform. They recently requested that the companies’ staff on their platform be enabled to request payday loans. Burdened by building the tech from scratch, they sought an easier option. That’s where Lendsqr came in. We provided the tech, and the rest is history.
A well-designed payday loan software should provide customers with seamless application options, such as applying directly through email or a secure payment link. This ease of access ensures a smooth borrowing experience, making it convenient for customers to secure funds quickly when they need them most.
Launching payday loan software is akin to setting up a lifeline for those in urgent financial need, like Jane, who needed quick cash for her broken refrigerator. These loans serve as a bridge for salaried workers, helping them navigate sudden expenses without derailing their finances. Worried about the tech setup? Let Lendsqr take care of it. Lendsqr powers some lenders, such as Irorun and Blocka Cash, who provide payday loans without stress. Send us a message at [email protected], and we’ll be happy to provide all the answers you need to get started.
Traditionally, implementing a new core banking system can take upwards of six months. Lendsqr dramatically quickens this process with pre-built integration adapters.
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