If you are willing to go for a short term cash loan then you should not take the short term cash advance decision lightly. You should choose from where you want to take your short term cash loan. You can apply for a short team loan from a bank or from a financial institution. But there are different criteria and loan interest rates in banks and private financial companies.
Short term cash loan
You can avail short term finance when you need the loan amount for a short tenure of less than one year. This short term loans are known as one time loan and it will be very useful in case you are unable to obtain the credit from a bank for a longer tenure of loan. In short term loan, the interest amount will be payable depending on the principal advance amount. The repayment tenures are also shorter than other types of loans.
Any individual or any company that has a small business can avail the loan from any private finance company or bank. But these kinds of loans are generally unsecured because when the bank approves your loan, you may require securing this loan amount with some collateral. Short term loans are also known as short term installment loans or short term finance loan because you can repay the loan amount in some monthly installments.
Features of the short term finance
Short term cash loan come with very exiting features but the features may differ from one bank to another. The short term loans may also differ when you are going to compare short term loans in the UK and short term finance in US. Some of the general features of short term finance are mentioned below.
- An individual as well as a small business is applicable to avail a short term loan.
- There are some companies which will give you loan depending on your credit score or credit history. But there are some companies which do not bother the short term loans bad credit score and can approve your loan even when your credit score is below the criteria.
- You can apply for short term loan online and the process is very easy and hassle free as it includes less paper work.
- You can get your short term loan approved within a day depending on the company’s policy.
- The short term loans can be secured or unsecured depending on the bank that is offering the loans.
- There are several banks that offer a short term loan repayment period ranging from 60 days to 120 days. So you have approximately 4 months to repay your short term loan.
Interest rates for short term loans
All kind of short term loans are payday loans or personal loans that has a very short repayment time that is 12 months or less so the interest rates may differ depending on the conditions. Another big factor that affects the interest rates of short term loans are institutions or banks that offers you these loans. If the borrower is taking a loan for a very short period of time then the interest rate will become extremely high. But the customer will not feel that it is a too big amount to repay. The rate of interest for a short time loan is approximately 18% per annum.
- Payday loans: Short term loans are payable loans that are offered by almost all private sector banks. These loans come with a very high interest rate that can go up to 2000% per annum. But there are many banks who can offer a short term loan at a low interest rate. But that could be also high as 400% per annum. Short term payday loans are offered by private lenders or banks and come with very high interest rates that can easily top 2000% p.a. There are lenders who offer lower interest rates however; these too could be as high as 400% p.a.
- Short-term loans from private banks: Generally the interest rates offered by banks are low compared to the interest rates offered by institutions. In a rough estimation the interest rate from banks are ranging from 120% to 270% per annum.
The rate of interest in short term loan differs depending on the loan type you choose. As an example the interest rate of a short term loan comes with an interest rate that is ranging from 10.65% to 21% per annum. There are some banks which can give you an interest rate on short term loan that is ranging from 12.5% per annum to 14% per annum. HDFC bank can give you a short term loan interest rate bridging from 9.50% to 11.50% per annum.
There is an added advantage of short term loan in India is that short term loans are tailored to fulfill everyone’s specific needs. If you want to go for a vacation then you can choose a personal loan. Like that if you are willing to buy a new house after selling your old property then you can go for a bridging loan. If you want to finance your company then also you can choose a bridging loan or an SME loan to fulfill your financial needs.
Short term loans bad credit history
Your short term loans bad credit history is the biggest reason to get your loan application refused by most of the banks in India. Many lenders will not approve your short term loan if you have a short term loans bad credit history. But there are some banks or private institution that will approve your loan even if you have a short term loans bad credit history. In that case your interest rate will go higher than normal sort term loans but you will get your loan approved by the institution. A bank can also approve a loan for an individual with short term loans bad credit history if you pay the payday loan. The bank will adjust your interest rate depending on how much short term loans bad credit history you have. The loan will depend on several other factors but if you can pay the interest rate then the bank will approve your loan.
Short term loans no credit checks
Sometimes, many private institutions or banks can offer you a short term loan without checking your credit history. This is a special facility that is provided at the discretion of the bank or institution. These short term loans are also applicable for small companies or businesses that want financial support for the betterment of their companies. These companies want financial support to meet their financial obligations in case they don’t have a line of credit extended by their banks. This short term loans are also applicable for students who are unable to pay their rents or tuition fees.
Short term loans from banks vs. private lenders
If you are willing to go for a short term loan then you should not take the short term cash advance decision lightly. You should choose from where you want to take your short term loan. You can apply for a short team loan from a bank or from a financial institution. But there are different criteria and loan interest rates in banks and private financial companies. We have compared the Short term loan’s terms and conditions in private banks and private financial lenders in the below list.
Interest rates: Banks interest rate for short term loan is lesser than the short term loan interest rate from private financial institutions. Where a bank can consider your short term loan at an interest rate of 36%, the private institution will charge you an interest rate up to 2000% per annum. There is a huge difference in the interest rate between banks and private lenders for short term cash loan.
- Easy approval: If you have a bad credit history then the private banks will not approve your short term loan because they always check your credit history and other important details before approving a short term loan. But if you want to apply for a loan even if you have a short term loans bad credit history then you should go for private lenders or institutions. Private lenders will not check your credit history to approve a loan. But the interest rate for the loan will be much higher than a bank.
- Fast loans: If you want your short term loan amount immediately then you should go for a private lender or institution because that will involve a very less amount of paper work and you can get your loan amount within few hours. But in banks, you need to go through more paper work compared to private lenders. Bank will not approve your loan without checking your credit score and other background details. In simple words, you can get fast money in private institutions compared to banks.
- Regulations: Generally banks have certain rules and regulations about who can apply for these loans which includes credit history check and background check. The process is long and includes more paper works for bank. But in Private companies, they do not have stringent regulations to make the application process easier to its customers.
In simple words, short term loans or payday loans are very expansive. So, If you have to take one for your personal use then you should make sure that you will borrow only the loan amount you need and not more than that.
Eligibility criteria for short term loans
The eligibility criteria for short term loan may differ from one company to another. Bridge loans and short term personal loans have different kind of short term loan eligibility criteria. Loan eligibility criteria will differ for SME loans too. The short term loan eligibility criteria are different for companies and individuals. The general criteria for Short term loan are mentioned below:
Short term loan criteria for individuals
- The applicants need to be salaried or self-employed.
- The applicant should have a monthly income that is above a certain amount. A rough estimation of salary could be Rs. 8,000 per month but the amount can differ depending on different bank’s policies.
- The age of the applicant should be between 21 years to 60 years. Again, these can differ depending on different bank’s policies.
- Banks have set the subject to the policies on forth.
- The loan approval from the bank may also depend on the ability of the individual to provide all his supporting documents to the bank.
Short term loan criteria for companies
- The companies should have a past relationship with the bank.
- They should be in a position where the company or business is making money. And the company is growing and did not meet any kind of loss in past 2 years.
- Companies should have specified annual revenue to qualify for the loans.
Documents Required for Short-Term Loans
- Applicant’s PAN card
- Applicant’s Proof of identity such as Aadhaar card, Driver’s license, Voter ID or Passport
- Applicant’s Proof of residence such as Rental agreement, Landline bill, Passport, Bank statement, Post-paid mobile bill, etc.
- Applicant’s bank statements for the last 6 months
- Applicant’s Proof of income such as Salary slips for the last 3 months
- Proof of employment of the Applicant such as Form 16, Offer letter or Relieving letter
- Applicant’s age proof such as PAN card, Driver’s license, Passport
This short term loans are known as one time loan and it will be very useful in case you are unable to obtain the credit from a bank for a longer tenure of loan. In short term loan, the interest amount will be payable depending on the principal advance amount. The repayment tenures are also shorter than other types of loans.
Short Term Loans FAQs
- Can I avail short-term loans with a low credit rating?
Low credit rating will give a bad impact on your short term loan approval. However, that is totally depending on your short term loan lender. Many private institutions will offer loan with a low credit score with a high interest rate.
- Do I need to make an arrangement for a guarantor for the approval of my short term loan?
Bank’s loan application process may differ from lenders to lenders. But in most cases you don’t need to make an arrangement for a guarantor for the approval of your short term loan.
- What is the minimum age to apply for a short term loan?
The age criteria may differ from lender to lender. But the minimum age requirement is 23 years in most of the bank to avail a short term loan.
- Is it necessary to furnish collateral or a security for short-term loan application?
As short-term loans are usually unsecured loans, that is totally depending on your lender.
- Within how much time I need to repay a short-term loan?
Typically, a short-term loan needs to be repaid within 1 year. However, this is depending on your short term loan lender and the loan tenure that you have chosen.