In terms of loans, people have different financial requirements, often expanded for short-term and long-term goals. Financial institutions extend various loans depending on the requirements and tenor of the loan. Moreover, individuals may need a loan to finance medical expenses, child’s education, wedding, etc.
In such cases, a short term loan is an effective financial solution to manage an urgent financial crisis. Besides, this credit facility allows borrowers to acquire funds without any hassle.
What are short-term loans?
A short-term loan is primarily an unsecured advance that allows individuals to meet personal and professional requirements quickly. Usually, a short-term loan is ideal for those with less than average credit scores because such borrowers find it difficult to obtain loans from traditional lenders.
Since this credit facility does not require any collateral, short-term loans are flourishing in the financial market and gaining popularity among borrowers. A short-term loan is primarily obtained to meet working capital needs and help maintain the cash flow.
There are various types of short-term loans, such as trade loans, installment loans, personal loans, demand loans, bank loans, etc. Bank loans are usually granted in terms of credit cards, discounted bills, cash credit, overdraft, etc.
For borrowers who do not have explicit knowledge about what is an overdraft loan must know that it is a type of short-term loan where financial institutions allow depositors or account holders to withdraw money even if the account balance is zero.
Features and benefits of a short-term loan
Before choosing a quick funding solution like short-term loans, one must gather essential information to avoid any complications in the long run. Below mentioned are a few of the benefits and features of a personal loan:
- No end-use restriction
Short term loans are multi-purpose loans that can be utilized to finance various financial requirements.
- No requirement of collateral
Being an unsecured credit facility, a short-term loan does not demand any asset as security against the loan amount. This credit option is beneficial for borrowers who do not own a property or asset to pledge.
- Flexible tenor
This credit facility is available for a short span. These loans are easily approved and can be repaid faster. The tenor of this financial option usually ranges from 1-12 months based on the lender and loan amount. Borrowers can use a personal loan calculator and opt for a tenor per their affordability.
- Easy accessibility
Various leading NBFCs and financial institutions offer this credit facility through online portals, and applicants can complete the entire process successfully and receive the amount within a few hours.
- Lenient eligibility
Ideally, small personal loans come with flexible eligibility where lenders significantly focus on the borrower’s repayment capacity. Choosing a short-term personal loan from leading financiers like Bajaj Finserv will allow borrowers to repay the amount conveniently and without any financial burden.
Read on to know about the eligibility parameters for a short-term personal loan:
- Applicant’s age should be within 21 – 67 years
- Must be employed in an MNC, public or private organization
- CIBIL score must be 750 or higher
- Applicant must be an Indian resident
- One’s salary should be at least Rs. 22,000 or higher depending on the city of residence.
Besides, documentation for short-term loans is similar to personal loans, such as KYC, address proof, bank account statement for three months, salary slip for two months, etc.
However, irrespective of the advantages of short-term loans, individuals must not skip on knowing the drawbacks. For example, the interest rates of these loans are comparatively higher than other unsecured credits. Moreover, as the tenor is shorter, EMIs will be higher, significantly impacting one’s repayment affordability.
In this regard, individuals can opt for an NBFC personal loan as an alternative option. This financing option comes with similar benefits with more flexible loan terms.
Besides, to find the right personal loan that matches their requirement, individuals need to know the following application procedure-
Step 1: First, individuals need to visit the chosen lender’s official website and seek a loan application form.
Step 2: After that, one must input all the personal and professional details and submit them.
Step 3: After initial approval, upload necessary documents online.
Step 4: Once the verification is over, the applicant will receive a call from the executive regarding loan approval within 24 – 72 hours.
On the other hand, individuals can reduce the hassle of documentation with the pre-approved offers extended by these NBFCs. It is available on a wide range of secured and unsecured products. Therefore, individuals can check their pre-approved offers by mentioning their essential credentials.
A short-term loan is considered an ideal option for borrowers requiring emergency monetary assistance. Besides, easy documentation and simple eligibility criteria are the driving reasons for its popularity.