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Dreams and emergencies have the habit of frequenting our lives. While we cannot stop them from coming, we can certainly stay better prepared to handle any disruptions caused by the emergencies. A short-term personal loan is one of the best ways to fulfil your dreams and fund your contingencies.
This article informs the things you should know about short-term personal loans, which include everything from eligibility and documentation to tenure, interest rate, and loan amount.
What is a Short-Term Personal Loan?
Unlike a personal loan, which has tenure of 12 to 60 months, a short-term personal loan can be between 1 and 2 years. The biggest advantage of this type of loan is that you do not require to keep any collateral for availing the loan. As soon as the loan is approved, you get the amount in your account.
What are the Features of a Short-Term Personal Loan?
Short-term loans offer the following benefits:
- Minimal documentation
- Faster loan disbursal
- Simple approval process
- Relaxed eligibility criteria
- No requirement for a collateral guarantee
Moreover, as the tenure is short, there is virtually no risk of default.
Why Should You Apply for a Short-Term Personal Loan?
Personal loans are one of the most popular loans offered by Indian NBFCs. You may use it for almost any reason you wish to. Although a quick fact-check with Indian lenders reveal that most borrowers apply for short-term personal loans for the following reasons:
- To use it for business purposes
- To sponsor a wedding
- To fund higher education
- To construct a room or house
- To renovate or upgrade a house or a business facility
- To take care of medical emergencies
- To travel abroad, for vacation
In addition to these, there are several other reasons for which borrowers prefer short-term personal loans.
Who Can Apply For a Short-Term Personal Loan?
A short-term personal loan can be availed by salaried or self-employed professionals if they satisfy the income and other criteria.
If you are a salaried professional, your monthly salary should be above INR 25000 if you are based in Mumbai or Delhi, and INR 20000 if you live anywhere other than the two metro cities.
If you are self-employed, then your profit after deduction of all taxes should be above a threshold limit set by the lender based on your profession and industry.
What is the Eligibility Criteria and Documentation Required for Availing Short-Term Personal Loans?
The eligibility criteria for availing short-term personal loans are simple.
- You must be an Indian citizen.
- If you are salaried, you should have experience of at least one year, and your current job must be six months old.
- Your age must be more than 21 and less than 60.
- If you are self-employed, your business should have been operational for at least 2 years, at the time of loan application.
In addition to these, your income should be beyond the threshold limit set by the lender.
Like the eligibility criteria, the documentation required to avail of a short-term personal loan is also easy.
You have to keep the following documents ready before applying for the loan.
- Application form and photograph
- Identity, Address, and Age Proof
- PAN Card
- 6 months’ bank statement or 3 months’ salary slips
- Income Tax returns record
- Form 16
- Processing fee cheque
To remain updated with the eligibility criteria, use a personal loan eligibility calculator.
What is the Interest Rate for a Short-Term Personal Loan?
The best time to apply for a personal loan is now, as the floating rate of interest is at its multi-year lows. The interest rates start from as low as 12.99%.
The personal loan interest rates depend on multiple factors like credit repayment history, the stability of income, loan amount, debt to income ratio, age, credit rating, and tenure.
Now that you are through with the article, it’s time to visit a few lenders and choose the one that suits you the best.
Before choosing a lender, check their credentials and loan features. A reputed lender is one which is as flexible as you are. Question the lender as much as you can before signing the deal.
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