Personal loans are the most viable form of debt that a person can avail when in need, and the fast-paced lifestyle needs have encouraged lenders to flood the market with attractive personal loan products. Lenders have sweetened the pot with minimum documentation, quick loan disbursal, and comfortable loan terms and tenure.
These loans are super useful when you need funds in a hurry, such as wedding, travel plans, vehicle purchase, or home renovation. Personal loans are great for short-term as well as long term requirements. Based on your needs, you can prepare a budget and figure out if your income can accommodate the EMIs. If yes, you may go ahead and apply for your personal loan!
Short-term Personal loan
These have a repayment period of less than one or two years. The interest rate for this type of loan is generally higher than those compared to other long-term personal loans. An individual can choose the loan amount and loan tenure according to one’s cash requirements. This type of personal loan can be availed by either salaried individual, self-employed individual or individual with a business. The terms of lending are decided based on the lenders policy and their eligibility criteria. These loans are also available online. Generally, the online loans are automated thus, take lower processing time to avail the funds.
Long-term loan
These loans typically offer a higher loan amount and a considerably lower interest rate. With this type of loan, you may have the option to choose between floating and fixed rate of interest. Loan-term personal loans are favourable as you are allowed to spread your loan over a long period of time. This helps make the loan affordable as the EMIs are lower as compared to short-term loans. However, the drawback is you have to service your loan for a long-period thus, adding loan obligations for a long time.
Benefits of Short-term Loans
From the above description, short-term loans come handy for short-term cash requirements and times of emergencies. Here are the benefits of availing a short-term loan -
Quick Cash – This is the quickest way of arranging funds for help in times of emergency. The process is fast, easily accessible, and stress-free.
Flexibility – Most of the lenders, you have the advantage of choosing a loan tenure which suits your cash requirements. You have the option to repay the principal outstanding amount in as short as 3 months or take as long as 12 months.
Short-term obligation – As the name suggests, you do not have any long-term liability attached with a short-term kind of loan. You do not have to hold the obligation against this debt for more than 12 months.
No collateral required/ Unsecured form of debt – You do not have to pledge any asset against the loan. Therefore, there is no risk of losing a prized possession.
Lower credit score – You can avail a short-term loan with a lower credit score, depending on the lender’s policy.
Lower interest rates – In most cases, the tenure of short-term loans is 12 months or less; this automatically translates into lower interest payment as compared to that for long-term loans.
Helps in improving your credit score – Since the repayment tenure of these loans is 12 months or less, the tenure of the liability reduces. This helps reduce the chances of defaulting against your loan payments.
Thus, a short-term loan like a salary advance loan is a safer bet that helps meet your instant cash needs at the quickest possible time. It also proves to be more profitable too!