S. Sridhar is a young professional in his first job and is all of 33. He wanted a personal loan of Rs 25000 to finance a trip to Goa with friends. But he was denied personal loansby many banks like : SBI personal Loan, HDFC Personal Loan etcas he had no credit history to show up. Also, most banks don’t provide loans for such small amounts. Then a friend suggested him to go for short-term loans. He applied for one online and got the amount in his account within a day!
As the name suggests, a short term personal loan is provided for a short tenure (as short as one month or one year). These are fast financing options offered by new-age digital lenders and fintechs.
These loans are one-time loans and you do not need to pledge any collateral/security for obtaining such loans. Usually, the interest needs to be paid on the principal advance.
Features and benefits of short-term loans
- Such loans are flexible
Short term loans are flexible loans and can be used for any purpose you like. You can use the funds for covering wedding expenses, planning a vacation with family, paying education fees, buying household furniture, home renovation or in case of a medical emergency. There is absolute flexibility when it comes tothe end-use of funds.
- You do not have to give any security for availing such loans
Short term loans are a type of unsecured loans with smaller loan amounts. As such, you need not provide any mortgage or security against the loan amount. Hence, such loans work perfectly for young professionals who struggle to obtain an unsecured loan. They are also useful for those whocannot afford any security/collateral for availing personal loans.
- Minimal/Nil documentation
While applying for short term loans, you do not have to provide any complex documents. Also, most of these loans can be applied online through different financial marketplaces/apps. The process of application, as such, becomes simpler and easier. You can even have a completely paperless experience depending on your profile
- Fast disbursal–
Short term loans are sanctioned much faster than any other types of loans. As these loans require fewer documents and there is no need for collaterals, the overall process becomesmuch simpler and faster.
- Amount of loan sanctioned
Short term loans are availed by people for fulfilling their short term needs. You can avail such loans for an amount as low as Rs1500 and up to a maximum amount of Rs10 lakhs.
- Flexible repayment terms–
As the repayment period for these loans is short, it reduces the financial burden on its customers. If your repayment tenure is below 30 days, you need to pay the full amount towards the end of your tenure. You can avail the option of EMIs if your tenure is more than 2 months. You can also pay back the loan through RTGS, UPI and NEFT as per your convenience.
- Long-term commitment is not required
As short-term loans involve smaller loan amounts and are provided for shorter tenures, the risk associated with these loans is minimal. Long-term loans require a commitment for a longer time and this increases the uncertainty and the risk of default. A borrower can go for a short-term loan without worrying about any long-term goal.
4 popularshort term lenders in India
A few short term lenders in India, along with their short-term loan schemes are listed below–
- Early Salary-
The lender has an interest rate of 2.5% per month for its short-term loans. The maximum amount of loan that can be availed is Rs2 lakhs and the minimum amount is Rs8000. You will get a period of 7 days to 43 days for repaying the loan amount.
- The lender does not restrict you in your end-use of the loan amount.
- There is no pre-payment charge or hidden costs associated with the loan.
- The customers will be charged interest on the basis of the number of days for which they use the loan.
For availing a loan from this lender, you will be charged interest at the rate that ranges from 1.75% to 3.25%. You can avail any loan amount from Rs5000 to a maximum of Rs 3 lakhs. The loan tenure can stretch from 15 days to 12 months.
- CASHe charges a nominal processing fee starting from Rs200 onwards.
- The lender also provides you with an extra 7 days for repaying the loan amount if your loan tenure is over 30 days.
- CASHe ascertains your creditworthiness by considering a number of factors such as your activity in social media, educational qualification, monthly income and work experience.
- Funds Tiger Short term loans-
This lender offers you a short term loan starting from Rs 50000 up to a maximum of Rs 20 lakhs. The interest rate varies as per the intended purpose of the loan and the security offered. The loan tenure is in the range of 3 months to 12 months.
- The loan amount gets disbursed to your account within 7 days of approval
- The lender will deduct the repayment amount directly from your account
- Providesattractive interest rates if you pledge a security/collateral.
- Money in Minutes-
This lender offers you a short term loan at an interest rate starting from 0.25% per day. You can avail a loan amount as low as Rs 1500 and up to a maximum of Rs2 lakh under this scheme. The period of repayment ranges from 1 day to 6 months.
- Any individual above 18 years of age can apply for this short term loan.
- Your loan application is instantly verified and as such,it gets sanctioned quickly.
- Once the customer repays the loan amount, he is eligible to apply for another loan with a lower rate of interest.
- Individuals who have defaulted in their previous loan/credit card payments can also apply for this loan.
Eligibility criteria for availing short term loans
The eligibility criteria that an applicant needs to meet may vary from lender to lender. However, we are mentioning below some general eligibility criteria followed by most lenders for short-term personal loans-
- The applicant must be an Indian resident.
- The applicant should be either salaried /self-employed or a business professional.
- The applicant must have attained 18 years of age.
- He must own a savings bank account.
- The applicant must have a minimum income of Rs15000 per month
- For salaried individuals, a minimum work experience of 2 years is required. The business owners should be at the business for a minimum of 1 year.
Short-term loans are unsecured loans with no restrictions on the end use of funds. As such, short term loans are beneficial for people who face difficulty in getting their best personal loans approved. No wonder why these loans are getting popular with loan-seekers with every passing day.