Every now and then, we may find ourselves short of funds at any point in our lives to meet immediate financial emergencies or obligations that are out of our control. The lack of financial resources can be for any reason. It can be wedding expenses, unplanned vacations, medical emergencies, school fees, buying a second-hand vehicle, or anything. And not all activities require a large sum of money. In this case, how can one obtain funds that are available immediately and for a short-term period? As a first step, we can seek assistance from our family and friends. Taking out loans from friends and relatives has a poor reputation because it can damage the relationship in the long run.
In contrast, if you intend to fulfill minor financial needs, you should refrain from taking on a heavy personal loan obligation. This leaves you with no choice but to apply for a Short Term Personal Loan. As the name implies, a short-term loan is a loan taken for a period of one month to two years. Here, the borrowed amount is also nominal and the repayment duration is also short.
Interesting isn’t it? Now it’s time to become familiar with quick-term personal loans and find out how to obtain them and what the eligibility criteria are.
What Is A Short Term Personal Loan?
Short term loans are generally defined as personal loan that is offered for a tenure of anywhere between 1 month to 2 years. These instant short term personal loans can be repaid in less than a year, or sometimes less than a week or a month. It is important to note that this type of loan can be availed without the need to pledge any collateral as security as they are unsecured loans.
As soon as your loan has been approved, these funds will be credited to your account immediately. However, there are some differences as to how short-term personal loans are defined based on the lender you choose to do business with.
Note: The term “short term” does not refer to the speed at which funds are disbursed, but rather to the limited period of time for which repayment must be made.
Also Read: Which Is Better, A Top Up Loan Or A Personal Loan? Everything You Need To Know
Reasons Why One Should Opt For A Short Term Personal Loan In India?
- An instant short term personal loan can be advantageous for a variety of reasons, especially for Indians. Over the past few years, India has become an increasingly popular destination for small businesses. In such a situation, a short-term loan may prove to be an invaluable financial option, especially for small businesses and start-up businesses that do not yet qualify for a bank’s credit line.
- Approximately one-third of the Indian economy is composed of the informal business sector and small businesses. Here, the payment of the goods and services provided is erratic and irregular in most cases.
- Credit cards, overdrafts in banks, and trade credits are some of the instances. By doing so, goods and services can be purchased from a supplier on credit rather than having to pay cash up-front.
- If a business is unable to manage working capital requirements and cash flow fluctuations caused by sporadic payments, it may experience discrepancies in the smooth operation of the business or it may even stagnate in its growth and progress.
- Likewise, it is evident to say why instant short-term loans are very popular among Indian small and medium enterprise owners. And there are no restrictions on how they can be used. The short term personal loan online allows lenders to disburse loans more quickly to applicants.
There are several types of short-term loans, but the most common are those granted to individuals or entities in order to solve short-term cash flow problems.
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Eligibility Criteria For Availing Of A Short Term Personal Loan
There are certain eligibility criteria that applicants must meet before they can receive a short-term personal loan. They are as follows:
Age and Nationality:
- It is mandatory that you must be a resident of India.
- If you are between the ages of 21 and 60 years old, you are eligible to apply for short-term personal loans.
- Most often, salaried individuals working for reputable private companies or public sector employees are eligible for this benefit.
- At the time of application, you must have been employed by the current organization for at least six months.
- Ideally, you should have had a minimum of one year of professional experience.
- It is necessary that you work for a private limited company or a public institution (including a state agency, local authority, or a central government organization).
- Your monthly income must be at least 20,000 per month. But for those who live in the metropolitan cities of Delhi, Mumbai, or Bengaluru, the monthly income should be at least Rs.25,000 per month.
Credit scores of 750 and above are usually considered a good indication of a person’s capability to obtain a personal loan. In contrast, the good news is that there are some lenders who also accept applications with low credit scores if the borrower meets the basic eligibility requirements.
Depending on the lender, these criteria can differ. Therefore, it is important to check with your lender to determine whether you meet their eligibility requirements.
Also Read: Can Late Credit Card Payments or Loan Payments Affect Your Credit Score?
Documents needed To Apply For Short Term Loans
The types of documentation you will need to provide for short-term personal loans can vary from lender to lender. Generally, it can be categorized into three categories:
- Proof of income
- Identity proof, and
- Proof of your credit history
Provided that you have to
- Duly fill out an application form for your personal loan along with a recent photograph.
- Present any type of identification proof, including a voting ID card, a driving licence, a PAN card or a copy of your passport.
- The following documents may be used for your address verification: Ration cards, telephone bills, rental agreements, passport copies, driving licences, bank statements or passbooks, or electricity bills.
- For age proof, you can provide a certificate issued by a statutory authority, a passport or a PAN card.
- It is important you have at least 6 months’ worth of bank statements or bank passbooks with records of your transactions in the last six months, or 3 months’ worth of salary slips. It must reflect the salary credited to your account.
- Obtain a copy of your income tax return.
- ITR/Form 16
- Processing fee cheque
How to Apply For Short Term Loans?
In general, a short term personal loan can be applied via online, through customer care, by visiting a nearby branch or by downloading a lender’s app.
Short Term Personal Loan Online
Upon visiting the lender’s website, the customer has to log in or you can directly go to the loan section, select ‘short-term loans’ from the variety of loans available or choose the minimum duration required, and click “apply”. You are required to fill out some mandatory fields on this page, like his/her personal and contact details.
After you complete the form, you will be asked to upload some necessary documents. Once you click ‘submit’, you will be notified immediately if your profile complies with the organization’s policies, and if your application will be processed further.
As long as the documents and the loan policy are valid and sound at the time of application, the lender will ensure quick disbursement of funds to your account. Commonly, a lender who manages the loan applications and approval process through a digital channel is more likely to provide a faster disbursement of loans to the applicant.
Download The App
Customers who possess a smartphone can download the lender’s application from the Google Play Store or Apple App Store. The entire loan process can be completed quickly and easily. It is not necessary for the customer to submit any physical documents and does not need to visit any office to obtain approval and disbursement of the loan.
Customer Care Support
Alternatively, the customer can contact their lender’s customer care number and ask their staff to assist them in applying for a short-term personal loan. Afterwards, you will be guided on how to apply online or via mobile app by the staff.
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Features Of Short Term Loans
- No collateral needed
- Can be availed even with less credit score
- Minimal documentation
- The short tenure of repayment
- Flexible end use
- Quick funding time
Short Term Personal Loan Interest Rates Offered By Top NBFCs
The following is a list of all the applications that provide short term personal loans in India for individuals in need.
|Short Term Loan Apps||Loan Limit||Interest Rates||Tenure|
|Buddy Loan||From 10k to 5L||11.99% per annum||From 3 to 60 months||Apply Now|
|Cashe||From 1k to 4L||2.5% per month onwards||3 to 18 months max||Apply Now|
|Early Salary||From 5k to 5L||18% per annum||Max 24 months||Apply Now|
|Lazy Pay||Up to 5L||18% to 25%per annum||From 3 to 24 months||Apply Now|
|Mobikwik||Up to 5L||5.50% onwards||Max 24 months||Apply Now|
|MoneyTap||Up to 5L||13% per annum onwards||Max 36 months||Apply Now|
|Money View||From 10k to 5L||1.33% per month & 16% per annum||From 3 to 60 months||Apply Now|
|PaySense||From 5k to 5L||1.4% to 2.3% per month||From 3 to 60 months||Apply Now|
|Simply Cash||From 50k to 5L||2.08% per month onwards||From 6 to 24 months||Apply Now|
Note: The interest rates of short term personal loans are subject to change.
Interest Rates For A Short Term Personal Loan
There are several factors that affect the interest rate of the loan. It includes
- The net income
- The validity and soundness of certain documents
- The existing monthly obligations
- The credit ratings
- The stability of the business
- The credit history of the individual, and etc.
The interest rate on a short term personal loan usually starts at 11.99% per annum, for a time period of one year or less, with no restrictions on end usage. The interest rate may vary depending on how much you borrow and from whom you borrow.
However, it is also possible that some lenders may consider a short-term personal loan to be one offered for a period of 2 to 3 years of time. There is no requirement for the applicant to provide collateral or security in order to qualify for short-term personal loans.
Advantages And Disadvantages Of A Short Term Loans
A short term loan is an excellent choice for applicants who are looking for a quick cash flow boost. In this case, one has to pay high EMIs, but the total interest amount calculated per year is far less than that incurred by those taking out longer-term loans. As a result, short-term personal loans are generally the most suitable loan type for borrowers who require a smaller loan amount.
- The shorter the tenure is, the higher the monthly EMI will be for the applicant, particularly if the loan amount is larger.
- The interest cost is reduced when the tenure of the loan is shorter.
- By not allowing the EMI (Equated Monthly Instalments)/NMI (Net Monthly Income) ratio to remain blocked for a longer period of time, the applicants are able to become eligible for future loans more easily.
- Quick disbursal if applied for a short-term loan online.
- They are lifesavers for small businesses and individuals’ requirements.
Factors To Consider Before Applying For Short Term Loans:
Here are a few considerations to keep in mind before applying for a short-term personal loan. They are
Impact on your Credit Score:
There is a possibility that your credit score may be adversely affected by short-term personal loans. As far as credit history is concerned, personal loans may require rigorous due diligence. Late payments on such loans can have a significant negative impact on your credit score.
Rate of Interest:
Due to the absence of collateral, some lenders may significantly charge high interest rates. As a result, they are more risky and are also more costly than traditional bank loans.
Repayment of Loans:
Businesses, in particular, may need to repay short-term loans on a daily basis, which may have a disadvantageous impact on their cash flow. Even if these are not paid for a single day, they could have a significant impact on the accumulation of interest. The importance of having a sufficient cushion for repayment is, therefore, of the utmost importance.
Delayed Payment Charges:
Most customers are charged a late payment fee if they fail to pay an EMI on time.
Quick Processing Fee:
Processing fees are charged to the customer. And standard GST is generally applied over the processing fee in most cases.
Upon late payment, the customer is subject to a penalty interest charge. The amount usually increases on a daily basis.
Thanks for reading this article. We hope that this will provide you with a better understanding of the importance of short-term personal loans and how they can assist you in improving your financial standing. Hopefully, you have gained a better understanding of what we are trying to convey.
And if you are looking for a personal loan with minimum documentations, Buddy Loan is the best platform. Buddy Loan helps to provide short-term personal loans instantly with a minimum and necessary amount of paperwork.
Having any queries? Do reach out to us at firstname.lastname@example.org
Frequently Asked Questions
Can I Foreclose or Prepay my Personal Loan?
If you wish to prepay the loan amount before the loan’s tenure, you may do so. However, in addition to foreclosure fees and charges, there are other costs associated with the foreclosure process itself.
What is the Minimum Amount That is Given for Short Term Loans?
For short-term loans, the loan amount can be as low as Rs.5,000 and as high as Rs.5 lakhs.
What is the Minimum Tenure to Repay a Short Term Personal Loan?
There is a range of repayment tenures available, ranging from 1 month up to 12 months (1 year).
What is the Minimum Interest Rate offered by Lenders for Short Term Personal Loans?
It is up to the lender to determine the interest rate for short-term personal loans. The interest rate, however, generally begins at 1.4% per month and 11.99% per year.
What Type of Loan is Best for a Short Term Loan?
Several options for Short Term Personal Loans are available, and each is the best in its own way. If you wish to eliminate your financial need, you can choose a loan that is tailored to your needs. To know more, click here.