A short term loan is a loan taken for a period of one year or less. When a long term loan cannot be taken from the bank, then a short term loan comes in handy. Under a short term loan, you have to repay the entire loan amount within 6 months.
People take many types of loans to fulfill their financial needs, most of which are short term loans. Almost all banks provide loans for short term. A loan taken in the short term can be very helpful in times of emergency. However, the person repaying the loan may have to pay high interest and many types of charges.
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How many types of short term loan
According to the Kalapaisa website, there are two types of loans. Secured loan and unsecured loan, whether it is a long term loan or a short term loan, the loan in which you pledge something is a secured loan or you are buying something with the loan money. And the second unsecured loan is like a personal loan, in this you do not need to pledge anything nor do you need to tell the reason to the bank NBFC, it is given only on your CIBIL and salary.
What is bridge loan
This is also a short term loan. If you are buying a house and you do not have enough money then you can apply for a bridge loan. Especially when you want to sell your old house and buy a new property, then this loan is very useful for you. This loan comes with a tenure of 12 to 18 months. Under this loan, banks give 70 percent of the property amount based on the customer's income.
Processing charges are levied on this type of loan and property has to be mortgaged. Its interest is higher than that of a long term loan. Under certain conditions, it is also allowed to convert it into a long term home loan.
What is Credit card loan
According to Kala Paisa, credit card also comes under short loan, in this you are given a credit line. Which we know as Pre Approved. Suppose you have got Pre Approved Rs. 1 lakh, then you can use that money anytime and anywhere. Interest and charges for both Shopping and Withdrawal are different.
Credit card loan is a pre-approved loan and immediately after the confirmation of the card holder, the bank issues this loan within a few days. No documents are required for this. The tenure of this loan is one to five years. It can be paid in EMIs.
What is short term loan
Meaning of short loan: Personal loan, loan taken on credit card, overdraft and bridge loan etc. come under the short term category.
Short term loan is given for a period of 1 year or less. This loan is approved within a few hours or within one to two days. This type of loan can be taken for sudden expenses like medical expenses in case of illness, sudden investment in business, shopping before marriage or any other big purchase, or buying and selling a property. But in this type of loan, you have to be ready to pay a higher interest rate than a personal loan.
What is short term loan interest rates
According to Kala Paisa, this interest rate can range from 8% to 40% to 45%. Generally, the interest rate on short-term loans is higher. Because you get it as soon as possible with minimum paperwork and it is a very small loan in the eyes of the bank, be it an NBFC or any other bank.
Benifits of short term loan
According to Kalapaisa, for this loan, there is no need for you to visit the bank, this loan can be easily availed online from the comfort of your home. There is no need to give any item or goods as collateral. Fewer documents The documents required for this are also very few. Hence anyone can easily avail this loan. You can also apply for it offline by going to the bank. In instant short term loan, the loan is approved within a day or two.
Disadvantages of Short Term loans
The tenure of a short term loan is less. Therefore, to repay it, a higher EMI has to be paid every month. Banks give loans at a higher interest rate as compared to other loans. This is the reason why the chances of default by the person taking this loan are also higher.
If you do not repay the installments of short term loan on time, then the bank charges a very high penalty. This makes it more difficult to repay it. In such a situation, it is important that you read its terms and conditions carefully before applying for the loan. Also, see if you have the option to repay the loan before time.
This affects your CIBIL score the most. The bank feels that it has a shortage of money or the management is not good, due to this your limit gets restricted. And the bank and NBFC consider you a risky borrower, stay away from it as much as possible.
What is the interest rate on a short-term loan?
Short term finance is available without any guarantee and within a few hours and it also provides more convenience as compared to personal loan. Due to this, a higher interest rate has to be paid in it. The interest rate in short term finance can be from 12% to 22%. There is also a fee in this which you have to pay once.
The processing fees of different companies may vary. Some companies may charge less than a personal loan and the interest rate in a personal loan is also less than short term finance. You should choose the loan option carefully before taking it.
Documents required for short term loan
- PAN card
- Income proof: Salary slip of last 3 months
- Residence proof: Rent agreement, Passport, Landline bill, Post-paid mobile bill, Bank statement
- Identity proof: Driving license, Aadhaar, Voter ID, Passport
- Bank statement of last 6 months
- Employment proof: Offer letter, Form 16, Relieving letter
Only a person who has a bank account and the account has been active for at least 6 months can apply for a short term loan. The applicant should have a regular source of income. The applicant should be from the salaried class and should work in a private or government limited company. It should also be kept in mind that the applicant should not have defaulted on any loan in the past. A person who fulfills these conditions will easily get a 6-month short term loan.
Top NBFCs for short term loans
Muthot Finance, Tata Capital, Bajaj Finserv, Stashfin, CreditBee, Navi Finserv, Money Tap, Dhani Lance, Money View Loans, Pay Sense, Fibe, Home Credit, Cash E, HDB Financial Services, Mahindra Finance, etc. are famous for short term loans.
Top Banks for Short Term Loans
HDFC Bank, State Bank of India, Punjab National Bank, Axis Bank, Canara Bank, IDBI Bank, Indian Overseas Bank, Yes Bank, Union Bank, Indusind Bank, ICICI Bank, Kotak Mahindra Bank, etc. are famous for short term loans.