Loans have become a part and parcel of our lives. We cannot imagine our lives without loans as it must be used for many purposes. With the rise in inflation, it becomes difficult to deal with all the expenses and lead a normal life. Therefore, you need to approach banks and financial institutions that would offer you loans. These loans are of different types i.e. short-term loans and long-term loans. Any loan that is given for a year or more, is considered as a long-term loan. Short term loans are not much prevalent in the market as banks and financial institutions like to earn more revenue from loan products. However, with the advent in loan products, banks and financial institutions have now started to look for offering short term loans. You can find such short-term loans available at individual lenders where they charge you high interest rates at 100% as well. But with the requirement of shirt-term loans, it is now easily available at many leading banks and financial institutions. You can take such loans for a span of a few days and up to one year. The interest rates are also less as compared to the individual lenders. But when compared to the other loans, it is expensive. The usual interest rate starts from 11.50% and can go up to any rate.
The interest rate calculation for a short-term loan is very different from the regular loan products. Unlike the other loan products, short-term loans have an interest rate based on per month level. This is because the loan is for a short period and can be availed for about a few months as well. So, it becomes easy for the lender to calculate the interest rate and keep it simple. For instance, if you are asked for an interest rate of 1.5% per month then the total annual interest rate would be 18% for the year. People who wish to borrow money for a short period can pay almost any amount as interest. So, if a person wishes to borrow a sum of 10,000 for a month and is willing to pay 1000 above the principle amount, he is ready to pay 10% for that month. But this when annualized can go up to 120% of the principle amount. This is huge for a person who wishes to take a loan for a year but small for anyone who wishes to take it for a month. When you apply for a short-term loan in a bank or financial institution, this gets normalized and the interest rate is not that high.
The documentation is an important part of a short-term loan or any loan available in the market. You would not get any loan if you do not have the proper documentation. But what is the ask in documentation? Well, the answer is very simple as you need not furnish any detailed documents. A couple of photos along with photo id proof and address proof is required for general documentation. But for a high loan amount, you would need to submit the bank statements and income proof along with the job stability documents to ensure that the principle amount is safe when lent to borrowers.
You can now apply for a short-term loan with banks and financial institutions with ease via Wealth County. You can also know about the EMI that would be charged to you for an X amount of loan by using our EMI calculator. This EMI is equally distributed into the number of months that you would take the loan for. You can calculate the EMI amount even before you apply for it with the banks and financial institutions. This calculator requires three inputs to know more about the EMI. These inputs are the loan amount, the interest rate and the tenure at which you would repay the loan amount in full. This would then calculate the EMI, total interest amount and total payment that you would pay for the entire tenure. This total payment is principle amount + interest amount. Such facility is great for you to know how much you need to pay on monthly basis so that you can plan your finances well in advance.
Short-term loans are the need of the hour. This is because such money can help you to get your immediate cash requirements solved and that too at an interest rate that is feasible for a short period only. The reason for the interest rate to be high is because it is given for a small period and the loss of the short time can be covered with a high interest rate. Banks and financial institutions can help their financial base by lending more and more short-term loans to all individuals. However, such loans are applied by businessmen, industrialists and commission agents who need cash for a short period and can repay it on time. It can help to boost your credit ratings as you clear the loan within a small period and still get your score high. The amount is at 10,000 and can go up to any amounts. However, banks and financial institutions now give short-term loans from 1 lacs and above. This is to cover the cost and to evade the borrowers who do not have a good track record.
There are two types of short term loans i.e. secured and unsecured. Secured loans are the ones that have a collateral attached to them. This means that the loan amount has a backing or support so that the lender can sell it at the end of the day if the repayment does not happen as discussed. These loans have a lesser interest rate as the borrower has given a security to the lender so that things do not go wrong. Unsecured loans are the ones which have no collateral with them. Such people are new startup companies and individuals who are not well to do and have no collateral as high as the loan amount. These loans have a high interest rate as the lender has a huge risk attached to it and would go in bad debts if the borrower flees with the loan amount. Therefore, they secure their share by applying a high interest rate. Banks and financial institutions go for a secured short-term loan as they cannot play with money invested. The individual lenders go for an unsecured short-term loan as they have no other option but to earn money in this form.
There are many benefits of a short-term loan which will help the borrowers to get help for their cash requirements. Let us look at a few benefits that would lure the borrowers to go in for a short-term loan.
There are many third-party companies who act as a lender for the borrowers and help them get out of their situation. Cash is one mode that is needed in all walks of life and you should look at saving it for the bad times. Mostly people who need cash always find such lenders so that it can be made available at a good interest rate. Lenders who do not have a legit process to follow or the right channel struggle to get more clients who would borrow money. But with this peer to peer process in place it is easy for the lenders to find borrowers in bulk and with a good return on investment.
You need to know which modes are available for such short-term loans so that you can make the most of it and get the funds arranged whenever required. Such loans do not have a pre-closure rate or charges. This makes it easy for the borrowers to take a loan and then repay it in the timeframe given. The flexibility we talk about is great in an individual lender setup as the lender has no fixed process to follow and can amend the rules as and when required depending on the situation. But for banks and financial institutions, they have very less room available for any changes to follow. They have a set protocol to follow and the detours set from the start in case of any short falls. So, compare the short-term loans and its benefits and features before you apply it with the banks and financial institutions or from individual lenders and peer to peer platforms. It would help you to know which one a cheaper option for you is and would help you save some money in such a loan requirement.