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Short term loans are pretty much what the name suggests – loan issue for a shorter period. There is no in-depth definition of it apart from acknowledging the fact that they are issued for a short period. And because of this reduced period of reimbursement, they have earned their popularity in some sectors and cases.
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The shorter period of repayment that is allowed under short term loans is generally of 1-2 years only. Given this range, the several kinds which have become popular are short term personal loan, short term business loans, short term loans, and others.
Another one of the most critical features of short term loans is that the interest is payable only on the principal advance amount and not a cumulative one.
Being different from the traditional loan options, these are one level easier to be availed and do not require a collateral in a majority of the cases. They are issued by some private banks and finance companies as well.
Despite falling in the category of loan, they have certain features and level of ease associated with them which are not found in the conventional options. With that being said, we have covered all that you need to know about short term loans and the most recognized ones in the country.
You can be a salaried employee or a self-employed person or even a businessman active for less than a year to avail short term loans in the country.
Let’s take an example of you trying to start a business. Now, you do have applied for a loan, and it is sanctioned, but the payment is yet to be received from the concerned party. However, you cannot wait beyond a specific date to get started with the work. Hence, to bridge this gap between the cash inflow and work, you can opt for a bridge loan. It can be said that it can serve as a short term business loan or even short term personal loan depending upon the need of the hour.
This one can be understood with the help of credit card usage. You request the lender to issue a sum of money to you, and along with this, you get a period to pay it back without any additional charges on it. This charge-free time period is generally of 30 days but can be extended depending upon the flexibility of the lender.
In this option, your bank acts as the lender for the short term loan you require. The bank provides a sanctioned overdraft limit and then you are allowed to withdraw up to that limit. This is helpful even in the case you don’t have equivalent bank balance in your account.
Though, particular interest is charged on this overdraft credit limit. These quick short term loans are indeed emerging in the private banks like Indifi and are being preferred for the short term loans.
If you are in a situation of urgent need of cash, then demand loans can help you. However, this requires you to submit collateral like insurance policies or modes of savings in which you have invested. Depending upon the period of maturity of your submissions, your quick short term loan is granted.
Depending on your requirement, say travel purposes, wedding arrangements, shop or home renovation-anything that requires immediate but short funds which can be paid back in a year or two can qualify for this category of short term loans.
In majority cases, these short term loans do not require any collateral leaving the lender to grant the amount on the basis of several factors like credit history, income level, and employment as well.
Loan providers charge high-interest rates for short-term loans. It is primarily done to compensate for the short repayment period. Also, short term loans are riskier than long-term loans as they do not carry any collateral. On the contrary, the long term loan applicants enjoy lower interest rates.
A short-term loan can prove an ideal financing solution if you seek immediate cash. You can use the funds to fulfill your business requirements like re-stocking inventory or payment of salaries. On the other hand, businesses that need funds to expand their operations should go for long term loans. These funds are ideal for purchasing a new plot, infrastructural development, or setting a new factory.
You see, short-term loans are generally for a 1 to 3 year tenure. However, as far as the long term loans are concerned, they range somewhere between 5 to 10 years. This duration can also extend beyond ten years. The higher the amount of loan, the longer the tenure will be.
Collateral is a crucial part of secured loans. Short term loan applicants usually need not pledge any personal asset. On the other hand, loan providers can ask the applicants to pledge collateral for long term loans. It acts as a security that the loan provider can seize anytime in case of repayment default.
The processing time of short term loans are lesser than the long term ones. Short term loans can be processed within a couple of hours. However, long term loans might take a few days or even a week to process. As far as the documentation part is concerned, long term loans require documents like balance sheets, copies of IT returns, bank statements, and so on. However, income proof and ID are sufficient for short term loans.
There are many defined steps in applying for short term loan online, but follow a set of ground rules to make the best of available options.
Check the interest rates, repayment period, processing fees, documents required, late payment fees and contact channels available before applying for a short term loan. Prioritize the listed ones according to your limit and timeline to use it effectively and repaying it.
It may happen sometime that you checked out all the policies under a short term loan and missed out on the eligibility. It is essential to ensure that the quick short term loan that you are investing your energy in, considers you eligible for the payment.
Make sure that you are applying for the short term loan through a verified link provided by the lender. Carefully fill in the key details like the amount, repayment duration and others to get your application approved at the earliest.
Now that you have done your bit, you need to give the lender the communicated time to review your application and take appropriate action from his or her perspective.
Though there might be specific parameters set by different lenders in the market, there are some rules which are at the least checked by all of them. The most common ones are: