Finding a source to fund urgent financial needs like organising your wedding ceremony, going on an unplanned trip, or paying unwarranted medical bills can be a difficult task. In such cases, a short-term loan can be a great way to get the required amount of money instantly.
However, getting such a loan comes with its own set of pros and cons. It is essential to understand the financial service before actually opting for it. Here is a small guide to help you learn about the different nuances of short-term personal loans.
What is a Short-Term Personal Loan?
A short-term loan is a type of loan provided to an individual for a tenure of up to a year. Some lenders may offer short-term loans with up to 5 years of repayment period. As the tenure is short, the interest rate charged is usually lower compared to a long-term personal loan. This is because the risk of defaulting reduces with a shorter tenure.
Furthermore, you are not required to submit any collateral to get this loan. However, if you borrow a high amount, it is possible that your EMIs can get quite expensive as the time to repay the amount is limited. These short-term loans can be utilised in multiple ways like paying off medical bills or consolidating debts, as there are no limits to its uses.
Eligibility Criteria For a Short-Term Personal Loan
Now that the concept of a short-term loan is clear, let us look at the common eligibility criteria required for this financial service.
- Nationality: Indian
- Age: 21-60 years
- Employment: Salaried or Professionals
- Credit Score: 750 and above
- Income: Differs from one lender to another
Documents Required For a Short-Term Personal Loan
When looking to apply for a short-term personal loan, always make sure to have the required documents handy. Here is a list of some common documents you are usually asked to submit when applying for such a loan.
- PAN Card
- Residential Proof
- Identity Proof
- Passport-size photographs
- Salary slips (last 3 months)
- Bank statements (last 3 months)
How to Apply For a Short-Term Personal Loan?
Now that you have prepared the documents you are required to submit and checked the personal loan eligibility criteria, it is now time to apply. Using the three methods explained below, you can apply for a short-term personal loan
1. Online Application
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- Visit the official online portal or website of the lender you choose
- Go to the ‘Loan Section’
- Select short-term loans
- Click on ‘Apply’
- Submit your personal information
- Upload documents as directed by the lender
- Click on ‘Submit’
Following this, your application will be reviewed and verified by the lending institution, which will then provide you with an offer.
2. Contact Customer Care
Another way to apply for a short-term personal loan is to contact the loan provider’s customer care team. You can ask them to provide you with the required assistance to submit an application. The personnel will provide you with instructions, you must follow to apply>
3. Mobile App
In this age of advancing technology, mobile phones have become one of the most vital gadgets that support our everyday lives. Even your financial needs can be taken care of with just a few taps. Download the mobile application of the lending institution you choose and apply via the application.
Tips For a Successful Short-Term Personal Loan Application
Just understanding the process is not enough. To ensure that you have better chances of getting the loan you apply for, it is essential that you keep some essential factors in mind when applying. Here is a small list of things that can affect your application and tips to secure the loan you need.
- Credit Score
Your credit score is one of the most important factors taken into consideration when determining your eligibility for a short-term loan. A high credit score is important to get the loan. Thus, it is advisable to maintain your credit score by making timely repayments of your existing debts and credit card bills.
- Debt-To-Income Ratio
Whenever applying for any loan, lenders tend to check the amount of liabilities you already have and your income. This is represented in the form of a debt-to-income ratio. It is important to have a low ratio, which indicates that you can afford another loan. This increases your chances of getting a short-term personal loan, as the lender is assured of your capability to repay. Hence, close all your loans if possible, or consolidate your debts to reduce this number.
- Additional Charges
When getting a loan, it is as important to pay close attention to the fine print, as it is to check the interest rates. Always compare the terms and conditions of the loan plans and decide on the plan that suits your requirements the best. Actively, look out for additional charges such as the processing fee, prepayment charges, and so on. These also add to the overall cost of the loan.
4. Repayment Options
When getting a short-term personal loan, make sure to look at the various repayment options available to you. Some lenders may allow you to pay just the interest for the initial part of the tenure, and the principal in the latter part of the loan term. You might also be offered various modes of repayment like UPI, Net Banking, and even auto-debit form, wherein your EMIs are deducted directly from the specified account each month.
When you are looking to borrow money, make sure to check the personal loan eligibility criteria. Make sure to maintain your credit score and compare your offers before applying. Look for lenders that provide you with lower interest rates and favourable loan terms. Use the tips we discussed and get started. Get a short-term personal loan and meet the huge expenses you have planned!
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