What is a Short Term Loan?
As the name implies, a short-term loan is basically provided for a short tenure which could be less than a year also. It’s a kind of unsecured loan that does not require you to submit any collateral or security.
Why Do You Need a Short Term Loan?
Short term loans are quite useful when it comes to meet your urgent financial needs, or you need quick cash to meet your short term needs. The amount received as short term loan can be used to meet your both –
- Personal needs.
- Business needs.
Short Term Loan for Business:
It’s an affordable option for the small businesses who need quick cash for a short term to run their business, but not eligible to apply for a long term loan from the bank. Short term loans are the most sought after option for small or big businesses to meet their immediate money crunch. Listed below are some of the business expenses that can be fulfilled with the help of a short term loan –
- Meeting monthly operational cost
- Business expansion
- Immediate capital requirement to run a business etc.
Features of Short Term Loans in India
- Short loan repayment tenure.
- No collateral required.
- Apply online and get it approved in no time.
- Can be availed by both salaried and self-employed individuals.
Types of Short Term Loan in India
There are different types of short term loans available in India that help you get quick cash to meet your short term financial requirements. Listed below are some of the most popular short term finance options that you may find useful:
Trade Credit –
It's a type of short term financing option that enables a trader to purchase goods or services from another trader on credit, and pay later at a scheduled date. It is a type of short term loan where borrowing and lending takes place between two traders; where one trader lends money to the other to purchase stuff on credit. It is a form of credit with no interest – the borrower need not pay any interest amount on the credit brought. Trade credit, which is generally given for a period of 30 to 60 days, helps a business to finance short-term growth
It's a type of short term loan where the borrower receives the loan amount for a particular period and needs to pay back the entire amount with interest as soon as his/her salary is credited in the bank account. In payday loans, the lender collects the entire amount from the borrower’s bank account. The interest charged on payday loans is comparatively high. It’s an unsecured loan and a credit check required to avail a payday loan. And you get your desired cash in your chosen bank account within a few minutes.
It’s another short term financing option used by people to meet one's personal as well business needs until he/she receives a long term financing option. It helps a borrower to meet the short term liquidity requirements and also known as gap financing as it helps in bridging the gap between short term and long term cash requirements. Such loans help you grab unexpected opportunities, and mostly used to meet the contingencies related to property buying and selling. Bridge loans are usually approved for a tenure of 6 months to 1 year, and require security/collateral to back the loan amount.
Another short-term loan that can help you meet any urgent financial needs is a demand loan. Banks or other financial originations may provide demand loans to customers after analyzing the history of creditworthiness of a customer and how good is his/her relation with the bank. It comes with the following flexibilities – here the borrower need not follow the regular principal and interest repayment schedule; there is flexible loan repayment tenure, and no security required to avail the loan amount. However, he/she needs to prepare to return the borrowed amount at any time on demand by the lender.
It’s a type of short term loan that can be taken against one’s salary account or term deposit or savings account opened with a bank. Overdraft loans or overdraft facilities helps you meet your short term financial requirements. Any banking intuition determines the overdraft limit based on a customer's existing relationship with the bank that includes a customer’s loan repayment history, account balance etc. The interest rate on the overdraft amount is calculated based on the amount of overdraft used.
Another means of availing short term cash is to apply for a personal loan which you can repay within a year. The amount received as a personal loan can be used for multiple purposes and, also to fund your business requirements. Nowadays, it’s quite easy to apply for a personal loan and receive the money in your bank account in 24 hours. It’s an unsecured loan and comes with flexible loan repayment tenures.
How to Apply for a Short Term Loan Online
It’s pretty simple. You can apply for a short term loan in India by following any of the below mentioned tools -
You can visit the lender’s website, register yourself, and then log in to apply. Click on the click on the loan section, select short-term loans, and click on “apply”. You would be required to fill in your personal details and other relevant fields to complete the application process.
Downloading Loan App
If you are a smartphone user, you can apply for it more easily. Download the lender’s application (as most lenders nowadays have their short-term loan app or mobile apps) from Google Play Store and fill in the required details and complete your application process on your phone and receive the loan amount in your bank account.
Additionally, you can contact the customer care of the chosen lender and request you to guide you throughout the process of applying for a short-term loan. They will provide your necessary guidance to apply for the same.
Steps to Follow to Apply for a Short Term Loan in India
Listed below are the some of the common steps you need to follow to apply for a personal loan in India via online or offline -
- Compare Short Term Loan Offers:
First, decide the amount you would require to meet your expenses and then compare the various short term loans available in the market. You may check and compare details like - loan amount offered, repayment tenure, processing fee, and the interest rate charged, and late payment fees, if applicable. This will help you make an informed decision.
- Choose Your Lender:
Once you compare various lenders and the short loans they offer, you select your preferred lender and contact them online by visiting their website or using their application. You can also take the help of a third party website to connect with your preferred lender. Besides, there are private lenders like Money View who lend you instant short term loans without doing any physical paperwork.
- Check Your Eligibility:
Once you choose the lender, check your eligibility which you can do online in no time or inquire about it from the customer care.
- Fill the Key Details:
Now, you need to fill the following information in the online/offline application form-
- Personal details,
- loan amount you wish to borrow
- Loan tenure
- Scan and Attach required documents.
And finally submit the application form with all required documents.
- Check Your Application Status:
Once you submit the application form, your lender will review your application and keep you updated about its status via SMS or email. The final status of your application - whether approved or rejected – will be communicated to you immediately within a day or two. However, the same process you can also track online.
- Get Ready for the Funds:
Once your loan application is approved, you will receive the desired amount in your chosen bank account immediately within a day or two.
Short-Term Personal Loan Interest Rates
Different lenders charge different interest rates on short term loans. Hence, the interest and processing fees charged on it vary from lender to lender. While deciding the interest rate on your short term loan, you lender may consider the following factors:
- Your relationship with the lender
- Your creditworthiness
The lowest interest rate on short term loans start with as low as 8.5% onwards. For example, We at Money View – the private lending company charges a monthly interest rate of 1.33% per month on personal loans which is also a type of short term loan. Besides, all lenders in India charge late payment fees and penalty charges if you can repay the loan on time or miss your monthly EMIs.
Documents Required for Short Term Loan Application in India:
The following documents are generally required to apply for a short term loan in India –
- Account History
This section has details related to all the credit accounts such as type of credit that was borrowed, name of the lender, account number, date the account was opened on, most recent payment, amount of loan borrowed, current balance, and a monthly record of up to 3 years of repayment.
- Proof of identity (PAN/ Aadhaar Card). .
- Proof of address.
- Proof of residence (Passport/Driver’s license/Voter’s ID/Phone or Electricity bill)
- Latest 3 months bank statement where salary is credited
- Salary slips for last 3 months
- 1/2 passport size photograph
Eligibility Criteria for Short Term Loans in India:
- Should be an Indian resident.
- Must be a salaried or and self-employed individual.
- Minimum monthly income should not be less than 15,000. Certain lenders also accept a minimum or Rs. 12000 or so.
- Should have a bank account/Income should be received in bank.
- Minimum age should be 18 years
- Maximum age should be 60 years.
Benefits of Applying for a Short Term Loan
- It’s easy to avail compared to a long term loan.
- Faster disbursement. It’s ideal for those who need instant cash.
- You pay lesser interest as the loan tenure is short.
- Get competitive interest rates as the short term loan market is highly competitive.
- Loan amount can be used for both personal and business requirements.
- Ideal for those who are not eligible for long-term loans
- Minimal documentation required
- Flexible and short repayment tenure.
- Hassle free application process.
Money View Short Term Loan
There are many private lenders like CASHe, EarlySalary, Fundstiger, Money in Minutes and Money View that provide instant cash to meet your short term requirements. With Money View, you can get a short term loan in less than a day without doing any paperwork. Just click here to visit the website or download our loan app from Google Play Store to apply online. Money View allows you to check your eligibility in 2 minutes. Once you apply, the money will be in your chosen account within 24 hours.
Short Term Loan FAQs
- How much do I get as a short term loan, if I apply for one?
It depends on your requirement plus your creditworthiness. Bank or your lender will decide the amount based on your eligibility which you can actually online or contact customer care.
What is the lowest tenure to repay a short-term loan?
A short term loan is usually offered for a period of 6 months to 1 year. However, depending on the type of short term loan you take and your lender, you may be asked to repay it within a month or two. For example, if you opt for Trade Credit, you need to repay the amount within a period of 30 to 60 days maximum.
Do I need to provide collateral to apply for a short term loan?
No. You do not have to provide any security or collateral to apply for a personal loan in India. However, if you are applying for a bridge loan which is also a type of short-term loan, then you need collateral to support the loan.
- Can I apply for a short term loan if my credit score is low?
Ideally, you should be as it is an unsecured debt. However, it depends on your lender. Besides, there are lenders like Money View who have their alternate credit model to help you in this regard. With a minimum credit score of 650, you should be able to apply for a personal loan from Money View.
- What if I fail to make repayment of my loan? Can I request to extend my repayment tenure?
- If you fail to repay your loan amount within the scheduled repayment date, you would be charged a penalty fee
- Yes, you can request your lender to extend the loan repayment tenure and your lender will decide whether it can do so or not.
- Can the amount received as a short term loan be used for business purposes?
Yes. It’s up to you how you want to utilize the amount.
- What is the minimum age requirement to be eligible for a short term loan?
You should be at least 18 years old to be eligible for the same.
- What are factors that my lender may consider to determine the interest rate on my loan application?
Your lender will mostly look into your relationship with it and your past credit history. If you have a good relationship with your lender, it becomes easy for you to get a competitive interest rate on your loan.
- What is an overdraft loan? How do I know if I am eligible for it or not?
An overdraft loan, which is a type of short term loan, is usually sanctioned to you against your salary account, term deposit, or savings account opened with a particular bank. If you meet the above-mentioned criteria, you are eligible for an overdraft loan.
- What is an EMI?
It stands for Equated monthly installments (EMI) that you need to pay back to your lender every month to repay your loan amount.