Short Term Loan

What is a Short-Term Personal Loan

A short-term personal loan provides borrowers with quick access to funds for a limited period, usually up to 12 months. Most banks and NBFCs offer quicker loan disbursal to the applicants due to the digital loan application and approval process.

Interest Rates

Short term personal loans usually come with higher interest rates compared to regular personal loans, primarily due to their shorter repayment periods. However, individuals with a strong credit profile, stable income and repayment history may get short term loans at lower interest rates.

Lenders offering Short Term Personal Loans

Kreditbee

Kreditbee is an online platform that offers short term personal loans at interest rates ranging between 12%-28.50% p.a. It offers instant loan disbursal with minimal documentation to its personal loan applicants.

Fibe (formerly known as EarlySalary)

Fibe is an online platform that offers instant cash loans at interest rates @ 18% p.a. onwards. To apply, simply download the Fibe app or register on Fibe’s website and fill in the required details.

Bhanix Finance and Investment Limited (CASHe)

Bhanix Finance and Investment Limited (CASHe) offers short term personal loans at interest rates starting from 2.79% per month. The applicants qualifying for personal loans at Bhanix Finance and Investment Limited (CASHe) can get their loans processed in 5 hours.

SMFG India Credit

SMFG India Credit offers short term personal loans at interest rates starting from 13% p.a. onwards. It also offers instant personal loans with faster loan approval and quicker disbursal.

Kotak Mahindra Bank

Kotak Mahindra Bank offers payday loans to salary account holders of Kotak Mahindra Bank with no documentation.

Why Short-Term Personal Loans

• Most lenders offer approval within 24–48 hours, especially if you have a salary account with them.
• Flexibility in usage
• The EMI/NMI ratio of the applicants does not remain blocked for a longer period, thereby improving their eligibility for future loans.
• Shorter tenures result in overall lower interest costs
• No collateral required

Things to Watch Out For

Before applying for short term personal loans, have a look at the following considerations:

• Higher Interest Rates: As the loan tenure is short, the interest rate may be higher compared to regular personal loans.
• EMI Burden: Ensure the EMI fits your budget. A high EMI/NMI ratio (more than 50-55%) can affect your future loan eligibility.
• Hidden Charges: Always check processing fees, prepayment penalties, and late payment charges before making an application

How to Improve Your Approval Chances

• Maintain a good credit score, usually 750 and above, is preferred by most lenders
• Apply with your existing lender – Chances of approval are higher if you have a salary, savings, or current account, or a past credit relationship with the lender.
• Keep your EMI/NMI ratio of around 50-55% or less
• Provide accurate and updated documents to avoid delays

Alternatives to Short-Term Loans

Here are a few alternatives to consider if short-term loans don’t fit your needs:-

• Personal Loans: Best for higher loan requirements. Banks may offer lower interest rates, especially if you have an existing relationship and a good credit profile.

• Loan Against a Credit Card offers quick disbursal against your credit limit. This is best suited for individuals with good credit history and low credit utilization.

• Secured Loans: Options like Loan Against Car, Gold Loans,  or Top-Up Home Loans (for home loan borrowers) offer lower interest rates and easier eligibility criteria due to the collateral involved.

FAQs on Short Term Loan

What is a short-term loan?

A short-term loan is a personal loan with a repayment period usually ranging from a few months to 1 year, meant for urgent or immediate financial needs.

Who can apply for a short-term loan?

Salaried individuals, self-employed professionals, and business owners with a regular income can apply, depending on the lender’s eligibility criteria.

What is the minimum salary required for a short-term loan?

Most lenders usually need a minimum net monthly income of Rs 15,000 for any personal loan.

What is the maximum loan amount I can get for a short-term loan?

The maximum loan amount for short-term loans is based on your income, credit score, repayment capacity and other aspects of your credit profile.

What is the interest rate for short-term personal loans?

The interest rate for short term personal loans are usually higher as compared to regular personal loans. However, individuals with a strong credit profile can get lower interest rates on their short term personal loans.

Are there any hidden charges in short-term loans?

Applicant should always check with the lender regarding the processing fees, prepayment penalties, late payment charges, etc, and read the loan terms before closing an application.

What happens if I don’t repay short-term loan on time?

Missing personal loan EMI payments attract penalties such as late payment charges, EMI bounce charges, Failed Standing Instruction (SI) Charges, etc. This can lead to an increase in total cost due to additional charges, a drop in your credit score and a reduction in future eligibility for loans/credit cards.

Can I prepay my short-term loan early?

Lenders usually allow prepayment of short term loans. Some banks/NBFCs may charge prepayment/foreclosure fees, while others offer zero charges.