Short Term Loan
Short Term Loan Details
Short Term Loan Overview
Short-term loans are available to both individuals and businesses with a short repayment period. Let’s take a look at the overall picture of Short-Term Loan.
The loans that are provided for a short period of time are termed as short term loans. The tenure for these types of loans is less than a year. The short term loan interest rates from bank to bank.
- If you are unable to get any credit from the bank, then these loans can be very useful.
- The interest is paid on the principal advance amount. The interest is very high for a short term loan.
- The repayment tenure for this type of loan is shorter as compared to other types of loans.
- Businesses and customers can avail this type of loan and the private finance companies or banks provide them.
- They are generally unsecured forms of loans but may require collateral if they are being provided by the banks.
- The other names for this type of loan are short term finance or short term installments.
- They are named like this because they can be paid back in monthly installments.
- These types of loans should be availed only when it is absolutely required as the rates of interest for these types of loans is very high.
You can also apply for instant short term loans online instead of going to a bank.
The features of short term loan differ from lender to lender. They are different when offered in USA as compared to UK.
The features of short term loans are:
- Short term loans can be given to an individual or a business. In the case of individual the monthly salary is taken into account and in the case of the business the profit and the number of years for which the business is running are considered.
- You can apply for these loans online as they require minimal paper work.
- They can be issued within a day and that depends on the policy of the company.
- They can be secured or unsecured and that depends upon the lender who offers the loan. In some cases the lender may require some form of collateral. Although generally this does not happen.
- The short term loan period in India can range from 60 to 120 days.
- The repayment period is approximately of 4 months.
- Some companies can offer you the short term loan even with a bad credit history.
- The private companies offer the short term loans easily as compared to the banks.
- The private companies however charge more interest as compared to the banks.
- It is therefore recommended to take a short term loan from a bank as compared to a private institution.
The interest rates for short term loans differ from bank to bank.
The tenure for this type loan is less than a year.
Another thing that affects these types of loan is the institution that offers these loans.
The rates of interest for this type of loan are extremely high. The rate can be as high as 18% for short term loans.
The rates also depend on the lender. Some lenders can charge more interest as compared to the other.
The interest rate of some of the banks are mentioned below:
- HDFC Bank: from 10.25 %
- ICICI Bank: from 10.25%
- Axis Bank: from 10.49%
- Yes Bank: from 10.99 %
Short term bank loans: As the name suggests these types of loans are provided by the banks and their interest rates are not as high as pay day short term loans which are provided by private companies. Their interest rate can be are 120% to 270% p.a. approximately.
Payday loans: These types of loans are offered by private lenders or banks and charge a very high rate of interest that can easily cross 2000% p.a. The lowest rate of interest of payday loans for self employed can be 400% p.a.
- Institutions at times offer short term cash loans to people without having any check on the credit history.
- They are beneficial for companies that require money to meet their financial obligations but do not have a line of credit.
- They can also be availed by students to finance their rent or tuition fees.
- Bad credit short term loans can also be offered by companies and banks.
- This is an added advantage of short term loan as they can be availed even with a bad credit history.
- Other types of loans are generally not approved with a bad credit history or may charge more interest.
- The financial institutions offer short term loans even with a bad credit history.
- The interest rates will be higher in such cases but the loan will be approved.
- There may be scenarios where banks will approve a Payday loan with a bad credit history and then adjust the interest rate according to the credit history.
- Interest rates:
- The rates of interest charged by banks are less as compared to that charged by private companies.
- Banks charge around 36% whereas private companies charge around 2000% per anunm for short tenures.
- Fast Loans:
- The private companies offer quick short term loan.
- Easy approval:
- The private companies offer loans easily even with a bad credit history.
- The banks may reject loans in such conditions.
- Banks have a lot of regulations about who can apply for a loan.
- The private organizations do not have any regulations as to who can apply for such loans.
Short term loans should be considered only when there are no more options left as they tend to be very expensive.
- Bridge Loans:
- These loans can be taken till you do not get another loan.
- In India these types of loans are associated with buying and selling of property.
- In situations when you want to buy a new house but do not have funds to finance it and your old house has not been sold yet, you can take bridge loans to finance you till you do not sell the old house.
- Short Term Personal Loans:
- These types of loans can be taken by self employed as well as salaried people.
- The amount of loan that can be taken can be about 30 lakhs.
- It however depends on the type of bank or company that you are approaching.
- The advantage of this loan is that there is no condition as to why you should take this loan and it is issued as quickly as 48 to 72 hours.
- It does not require a lot of documentation.
- Demand Loans:
- This type of loan is given to meet any sudden demands.
- They are secured loans and require you to provide saving instruments like NSCs and insurance policies.
- The amount of loan sanctioned depends upon the maturity value of your savings.
- The loan can range from 70% to 90% of the matured value of the savings instrument.
- SME short term loans:
- These loans are given by the banks to the companies that need the loan to finance their immediate requirements.
- The company needs to meet the eligibility requirement of the bank in order to avail this loan.
The eligibility requirement is different for different types of short term loans:
- The approval of this type of loan depends on the capability of the person to provide all the supporting documents.
- The age of the person should be between 21 to 60 years of age.
- The applicants can be either salaried or self-employed.
- The monthly income should be at least 8,000 per month.
- The business should be making money or should be doing so for a minimum of 2 years.
- They should be in operation for a specified period of time.
- They should have a past relationship with the bank.
The eligibility criteria for these loans changes for each loan. It is different when it comes to bridge loans and personal loans. With SME Loans too, the eligibility criteria will differ since they can be taken by companies rather than individuals. A general criteria for these loans could be:
- The applicants need to be salaried or self-employed.
- They will need to have a monthly income that is above a certain amount. A rough estimate could be Rs. 8,000 per month but this figure is subject to the bank’s policies.
- They will be also need to be between the ages of 21 years and 60 years, again subject to the policies set forth by the bank.
All supporting documentation may be an important factor for the approval of a loan.
- They may need a past relationship with the bank.
- They will need to be in a position where the business is making money or has been do so in the past 2 years or so.
- They may also have to be in operation for a specified period of time and have a specified annual revenue to qualify for the loans.
- PAN card
- Proof of residence like a passport
- Proof of income like a salary slip of the recent 3 months.
- Proof of age like driver’s license
- Bank statements for the last 6 months
- Proof of employment like an offer letter
- Identity proof like Aadhaar card.
- Can one avail the short term loan with a low credit rating?
- It depends on the lender.
- Most lenders do offer short term loans even with a low credit rating.
- Is collateral required for short term loan?
Generally no collateral is required. However some lenders may ask you to produce a collateral for short term loan.
- What is the tenure period for a short term loan?
The short term loan should be paid within a year. This varies according to the company and the tenure period.
- Will I require a guarantor for the approval of my short term loan?
It depends on the lender. Most probably a guarantor is not required for the approval of a short term loan.
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