In recent years, short-term loans have emerged as a great financing option to meet urgent fund requirements. In case of short term loans, the repayment tenures are shorter as compared to traditional loans. Moreover, the interest rate is charged on the principal amount. Short term loans are a wise choice for people who fail to qualify for traditional loans owing to their poor credit score. With the help of leading financial institutions, borrowers can easily apply for a short term loan from the comfort of their home.
Now, that you are well aware of various aspects of a Short-Term Loan, let’s have a look at short term loan types available in India.
Below are some of the types of short-term loans in India
Bridge Loans
- Bridge Loans are offered against property or collateral and thus are secured loans.
- The name is bridge loan because when borrowers take these loans, they know that they will have an income in their way very shortly, but at the moment they require cash.
- The loan amount in case of bridge loans is approximately 70-80% of the value of property pledged as collateral. Attractive interest rate and flexible repayment schedule are some of the major benefits of a bridge loan.
Personal Loan
- Personal Loans are short term multipurpose unsecured loans that can be availed by the borrowers to meet their personal requirements.
- Short-term personal loans can serve various purposes such as managing wedding expenses, medical emergencies, funding higher education, etc.
- Since a short-term personal loan is an unsecured loan, the rate of interest associated with it is comparatively higher.
- Minimum documentation, instant approval and fast disbursal of the loan amount are some of the other benefits of availing an instant personal loan online.
Trade Credit
- Trade credit is similar to that of a Credit Card.
- Borrowers can avail trade credit with leading banks and other financial institutions. The amount can be availed for a maximum of 30 days. Borrowers can repay the whole amount within 30 days or can opt to convert into Equated Monthly Instalments (EMI).
- The lending institutions do not enquire the borrowers about the purpose of availing the loan credit and hence, the amount availed can be utilized as per the discretion of the borrower.
- Another advantage of trade credit is that the interest is charged only on the amount utilized.
Bank overdraft
- Borrowers with a current account can avail this loan to meet their financial requirements.
- Bank overdraft is greatly helpful in the times when borrowers require urgent money but don’t have sufficient balance in the account.
- The interest rate is levied on the amount that has been withdrawn from the overdraft limit.
Demand Loans
- Demand Loans are by availed pledging insurance policies and other saving instruments as collateral.
- These short-term loans are known as demand loans because the borrowers avail these loans as per the demand and the severity of the financial crisis.
- The loan amount in case of demand loans is decided by the lending institutions.
Now that you are well aware of the various types and short term loan benefits, ensure that you make the most of it to meet your financial needs. Learn about the personal loan process steps for availing a personal loan.
