Short term loans offer financial flexibility, but come with higher interest rates.
Short term loans are a common solution for individuals in need of financial assistance. These loans are often provided by banks and are unsecured, meaning that the borrower does not need to put up any collateral to obtain the loan. Short term loans typically have a repayment period ranging from six months to a year, and they are usually approved quickly with funds transferred to the borrower's account within one to two days.
Short term loans come in many forms, including personal loans, credit card loans, overdrafts, and bridge loans. Personal loans are often given to those with low credit scores and a monthly salary of at least 25,000. To apply, borrowers must provide identification such as an Aadhaar card, voter ID, or PAN card, and banks may also request ITR or Form 16 to determine the borrower's current salary. Banks typically make the EMI of this loan more attractive than that of a long term loan.
A bridge loan is another short term loan that is particularly useful for those buying a new property while also selling their old property. The loan has a tenure of 12 to 18 months, and banks offer up to 70 per cent of the amount of the property based on the borrower's income. Processing charges are typically applied to these loans, and the property must be mortgaged. The interest rate is higher compared to long term loans, but it is possible to convert it into a long term home loan under certain conditions.
Credit card loans are pre-approved loans that are issued by the bank immediately after confirmation from the cardholder. No documentation is required for this loan, and it has a repayment period of one to five years that can be paid in EMIs.
Although short term loans can be helpful in times of emergency, borrowers may face higher interest rates and various types of charges. It is important to carefully consider the terms and conditions of the loan before deciding to take one out.
Read more: Bank of Baroda announces reduced home loan, MSME loan interest rates for limited period, check details
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