Tuesday, July 10, 2018

Short Term Loans to Meet Your Urgent Short-Term Needs



Short-term loans are the ones that are necessarily offered for a short period of usually less than a year. They are one-time loans and come to use when it turns difficult for you to obtain a loan from a bank with a bigger tenure plan. These loans have their rate of interest decided on the amount of the principal advance and payback periods shorter in contrast to other forms of loans.

Individual customers or businesses alike get a short-term loan that is provided by banks or private financial institutions. These loans are usually unsecured in nature. However, few banks offer short-term loans only on collateral guarantees.


Interest rates for short-term loans


Factors that determine the interest rate can be the types of the loan, which are either payday loans or personal loans that are payable in a year’s time or less and the institution that provides these loans. Generally, the interest rate for short-term loans is close to 18%.

Features:

  • Can be applied by an individual, a partnership or a business conglomerate
  • Can be availed even by those having poor credit histories
  • Can be applied online with minimal paperwork
  • Can be both secured and unsecured in types depending upon the lender’s preferences
  • Short repayment period, which is anything between 2 months to 4 months.

Types of short-term loans:







Personal loans:

  • Can be availed by salaried or self-employed individuals
  • Loans upto Rs 30 lakhs can be availed
  • Loan repayment period ranges from 6 months to 5 years
  • Minimal documentation and no restrictions on how to use the fund
  • Quick loan approval and disbursement within 2 to 3 working days

SME short-term loans:

  • Offered by banks to companies for meeting sudden fund crisis
  • Eligibility criteria include the company’s minimum annual turnover
  • Composite limit is either Rs.5 crores or a fixed multiplier to the borrower’s actual net worth.

Bridge loans:

  • These loans tide you over till you get another
  • Usually related to transactions like simultaneous buying and selling of properties 
  • Can also be availed by companies waiting for their funds to be processed and notified
  • Can be borne by companies to counter expected returns.

Also Read: Bridging Finance- Its Types, Important Facts about Bridging Finance

Demand loans:

  • Provided by financiers to mitigate crucial financial concerns
  • Can be secured by mortgaging insurance policies and NSCs
  • Approved loan amount is a typical 70% to 90% of the maturity value of the collateral savings.

Eligibility criteria

It varies depending upon the types of loans mentioned above. However, a general set of criteria to avail a short-term loan is specified below:

For individuals:
  • The applicant has to be salaried or self-employed
  • The applicant is eligible with only a monthly or yearly income above a certain amount, pre-fixed by the financing company
  • The applicant needs to be aged between 21 years and 60 years, but again based upon the policies conveyed by the financing company
  • The applicant must be able to provide all the required documents

For companies

  • They may require having a past involvement with the bank
  • They may require showing a successful business proposition with a substantial profit making for a couple of years or so. 
  • They may require being in continuous operation for a fixed period
  • They may require making a specified yearly revenue

Short-term loans with poor credit history or no credit checks

There are financing companies that offer short-term loans to a seeker with a bad credit history. The interest rates are pretty higher but still, the loan is ratified. The poor standing of the credit score dictates the interest rate.

At times, the institutions don’t check the credit history at all. Sometimes they are extended to companies to meet critical financial obligations. This facility lies at the sole discretion of the financing agency.



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