A short-term loan gives an individual a tenure existing somewhere between a month to a year. Short term loans are beneficial for individuals that are unable to get loans for longer tenures based on some reason. They are also mostly unsecured, that is, you do not have to provide any money or security for the loan amount. Short term loans are also known as short-term instalments or short-term finance.
In order to get short term loan, you have to look into the pros and cons of the feature. You also need to research more and see what suits you the best. Some key points are mentioned below.
Advantages of a Short-Term Loan
Short term loans have certain benefits. Some of them are:
Flexibility – They can be used for multiple purposes. For instance, you can issue short term loans for organizing a wedding, taking a family vacation, renovating your home, paying for education, buying products such as electronics or furniture, building a business or even a medical emergency.
Loan Amount – Short term loans are opted by people trying to pay off medical bills, planning a wedding or even organizing an unplanned trip. The minimum amount for short term loans is Rs. 5,000 and can range up to Rs. 3,00,000. You can choose the loan amount based on your needs and requirements.
No Collateral – Since short term loans do not need any collateral, you do not have to provide any money or property as a security deposit. This is advantageous for customers opting for a loan but not having any collateral to keep as security.
Tenure – As discerned by the name, short term loans are taken for a small amount of time. They are easier to get approved as they are repaid quickly and would reduce the financial burden of an individual. The tenure is mainly between a month to a year.
Quick Disbursal – Since you do not have to provide any kind of documentation or assets for getting the loan amount, the disbursal is rather quick. As mentioned earlier, you do not have to pledge any collateral either.
Documentation – The documentation and paperwork necessary for short term loans are very minimal and takes little to no time. Therefore, taking a short-term loan is quicker for the customer as the paperwork can be completed without much of a hassle.
Are you Eligible for a Short-Term Loan?
In order to prove your eligibility for a short-term loan, you should be able to meet the following criteria:
- You should be an Indian resident.
- You must be a self-employed or salaried individual.
- You should fall between the ages of 21 and 60 years.
- A valid credit score (if any) can act as a benefit.
- You should have a minimum income of Rs. 15,000. For some instances, a minimum income of Rs. 12,000 is also accepted.
These are general guidelines. However, they might change from lender to lender. You have to consult with your specific lender in order to know about their eligibility criteria.
What are the Documents needed for a Short-Term Loan?
In order to get your loan sanctioned you need to submit the following documents:
- A passport-sized photograph
- ID proof
- Bank statement for the last 3 months (where the salary is sent)
- PAN card
- Salary slips for the last 3 months
- Proof of residence (Passport/Driver’s license/Voter’s ID/Phone or Electricity bill)
The documents vary from lender to lender and it is best to check with your lender to see what paperwork needed for the loan.
Additional Points
It is not just about taking a short-term loan and repaying it to your lender but you have to take into account certain terms before applying for one. Before you decide to opt for a short-term loan, here are some of the things that you need to look into:
Interest Rates – Every lender has a different interest rate. For instance, CASHe has a rate of 1.5% per month while EarlySalary charges Rs. 9 per day. Money View started with 1.3% per month while PaySense offers 1.4% to 2.3% per month. Due to the short duration of the loan, the accumulated rate would not affect you much. In fact, opting for a short-term loan is much cheaper than a long-term loan. Repaying the loan amount with the interest rate for a short-term loan is way more economical than paying a long-term loan.
Processing Fee – While applying for a short-term loan, you will be charged a processing fee by the lender. In most cases, a GST would be added to the processing fee.
Late payment charges – If you make a later EMI payment, you would be charged a late fee.
Penal Charges – In case you pay late, you would be charged a penal fee, which is charged on a regular basis until you complete the payment.
Final Take
A short-term loan is easy and manageable for many individuals. If you are in need of a loan, opting for a short term will be beneficial.
