5 Different Types of Short Term Loans in India

Types of Short-Term Loans

Financial institutions offer different types of short-term financing you may borrow to suit your needs. Some of the best options include the following:

Trade Credit

Trade credit is an affordable way to obtain an interest-free loan for an urgent purchase. Usually, you must repay it in 30 days. However, ask for a longer tenure to fit it into your budget. A flexible tenure allows additional funds and time to finance various initiatives.

Bridge Loans

A bridge loan helps cover the expenses until you obtain another loan of a bigger value. Many people take these loans in India for property transactions. If you are waiting for funds from another loan, a bridge loan can cover the gap with sufficient funding for a short period. It is a preferable funding option when you want to wait for the right time to apply for a bigger loan with better rates and terms. 

Personal Loans

Personal Loans are unsecured loans you can use to cover various expenses like weddings, education, home renovation, medical emergencies, or travel costs. Lending institutions evaluate your Personal Loan eligibility based on your employment, credit history, income level, etc. What makes a Personal Loan different from others is its higher loan amount and longer repayment tenure of up to 36 months.

Demand Loans

You may obtain a demand loan against your insurance policy or another savings instrument like NSC to cover an urgent need. The maturity value of the savings instrument determines the loan amount and eligibility. Many instruments also have a lock-in period before which you cannot demand a loan against it.

Bank Overdraft

You can obtain a bank overdraft on your current account. With a bank overdraft, you get an overdraft limit up to which you can withdraw funds despite insufficient cash in your account. The interest rate applies only to the amount you withdraw. However, check out additional costs like fees per withdrawal, etc., before obtaining a bank overdraft.

Features and Benefits of Short-Term Loan

If you are looking for the most suitable types of short-term loans to borrow, it's essential to understand their features and benefits before applying:

Quick Disbursal

Many new-age lending institutions like Hero FinCorp support 100% digital loan application procedures that do not require any branch visits or physical paperwork. The online process eliminates any additional formalities, making quick disbursals possible directly into your bank account. 

Flexible Repayment Schedule

With flexible repayment terms of up to 36 months, you can choose a tenure with budget-friendly EMIs. An EMI calculator helps calculate EMIs for various loan terms, allowing you to choose a tenure with affordable EMIs.

Limited Documentation

A short-term loan application process demands minimal documentation for verification. These only include your identity, address, and income proof. The documentation procedure does not involve any paperwork either, as you can simply scan and upload the required documents through the website or app.

Immediate Financial Relief

Features like no collateral requirement, 100% digital loan procedure, simple eligibility criteria, minimal documentation, and no end-use restrictions make short-term loans an immediate financial resource for urgent needs.

Credit Score Improvement

With regular EMI payments, you can improve your credit score and eligibility for a bigger loan.

What are the Eligibility Criteria for a Short-Term Loan?

The eligibility criteria may differ depending on the type of short-term financing you borrow. Ideally, the applicant should be an Indian citizen from 21 to 58 years of age. Moreover, they must have work experience of at least six months for salaried Individuals and two years for self-employed professionals. A minimum salary requirement of Rs. 15,000 per month is also applicable.

Reasons to Choose a Short-Term Loan

A short-term loan offers multi-faceted benefits, making them the best funding option for urgent needs. Primary reasons to choose short-term finance include the following:

Quick Application Process

The application process is 100% online and involves no physical paperwork or branch visits. Consequently, you can apply for a loan in minutes without hassle.

Quick Access to Funds

No collateral requirement, the digital application process, and no paperwork and branch visits let the lenders evaluate your application in minutes, giving you quick access to funds with instant approval.

Cost-Effective for Short-Term Needs

A short-term loan has lower interest rates than credit cards and many other loan types, making it a cost-effective financing solution for short-term urgent needs.

Repay Through Manageable Monthly Instalments 

Flexible repayment terms allow you to choose a tenure with budget-friendly EMIs, making repayment easily manageable.

How To Apply for a Short-Term Loan?

Here is a stepwise procedure to apply for an urgent short-term loan:

• Visit the lender’s official website or download the loan app.
• Fill out an online loan application form.
• Scan and upload the necessary documents.
• Wait for approval and review the loan offer carefully.
• Accept the loan offer to get disbursal directly into your bank account.

Conclusion

Hero FinCorp offers emergency loans of up to Rs. 3 Lakh with a repayment tenure of up to 36 months. Thanks to the 100% digital loan process, you can get instant approval and disbursal into your bank account within a few hours. Moreover, these loans have no end-use restrictions, allowing you to use the loan amount for any urgent expense or desire. 

Frequently Asked Questions

1. How Can I Secure A Short-Term Loan?

You can secure a short-term loan by applying online through the lender’s website or app.

2. What Is The Period Of A Short-Term Loan?

Hero FinCorp offers short-term loans with repayment terms of up to 36 months.

3. Is There Any Collateral Needed For A Short-Term Loan?

Short-term loans are unsecured Personal Loans that do not require any collateral, guarantor, or security for approval.

4. What Is The Loan Amount Offered For Short-Term Loans?

At Hero FinCorp, you can obtain a short-term loan of up to Rs. 3 Lakh without any end-use restrictions.

5. What Makes A Short-Term Loan Different From A Long-Term Loan?

The loan amount and repayment tenure make a short-term loan different from a long-term loan. A short-term loan has a smaller amount and shorter repayment period than the latter.