If you are in need of urgent liquid money and can’t opt for a regular personal loan, a new loan instrument may just be your answer. Short-term loans in structure work similar to personal loans, but have a much shorter duration and are faster in disbursal.
These instant loans can make your life much easier without having to run around banks as they are disbursed online with minimum documentation. Find out how these work and how to choose the right one:
What are Short-Term Loans?
Short term loans are essentially personal loans made available ‘instantly’ and for a short tenure. They are mostly approved and disbursed either in a matter of a few hours or within a day or two.
If sudden unexpected expenses arise before a marriage ceremony, urgent medical needs, large purchases or even a quick cash requirement for your business, this loan instrument can be opted for. You should, however, be mentally prepared for a higher interest outgo than a traditional personal loan.
Since short-term loans are given without any collateral and have a more flexible criteria for borrowers than regular personal loans, the interest is on the higher side – ranging anywhere from 12% to 22%.
There will be a one-time fee attached but some lenders may have lesser processing fees compared to regular personal loans. On the other hand, regular personal loans will have cheaper rates of interest. See which suits your need and opt for the one that fulfils your need.
Unlike regular personal loans which come with a tenure of minimum 6 months, short-term loans can be taken for a minimum tenure of just 15 days. The maximum tenure differs from lender to lender, but since these are short-term loans, the tenure would ideally not cross 6 months.
Some lenders also allow a flexi-prepayment plan with no pre-payment or foreclosure charges. Try opting for these lenders as you can clear your debt faster if you manage to get the funds required before the loan tenure ends.
The eligibility is similar to personal loans but short-term loans may additionally require you to be above a particular income bracket. Other than that the following are needed:
# Must be a salaried or a self-employed professional
# A regular income to pay back the loan on time
# Good credit history
# The borrower should be between 21 and 60 years of age
# Salary slips for the last three months
(The writer is CEO at Bankbazaar.com)