Denice R. Preston
A personal loan for a short term is a great option to help you manage an unexpected expense. You don’t need to provide any documentation. Most of these loans are unsecured, so there is no collateral. The application-and-grant process is also quick and easy – generally completely online.
You can approach a bank to apply for a personal loan if you have a good credit rating and a steady income from self-employment or salary. A good credit history is all that is required to get a loan amount of Rs 25,000 or less. However, a borrower can still obtain a loan up to Rs 5 Lakh if they have a good credit score. Fintech companies offer personal loans up to Rs 25 Lakh for short-term amounts. For E.g., Bajaj Fintech provides medical emergency loans of up to Rs 25 Lakh.
The rate of interest on the loan may vary depending upon your creditworthiness. It could be anywhere between 8% and 30%. The repayment term of a loan can vary from 3-6 months to 1-2 years. The repayment term for certain loans, which are discussed below, could extend up to 6-7 years.
Let us take a look at the most popular short-term personal loans categories:
- Home Renovation Loan
A long-term loan for a home is outstanding if your goal is to purchase a new home. However, a personal loan for a home renovation may be more suitable. A renovated home is more attractive than a house that has been renovated.
The maximum amount you can borrow is Rs 2 Lakh to Rs 3 Lakh. A short-term loan program will not allow you to borrow a more significant amount. Banks and NBFCs may offer longer repayment terms of between 20 and 30 years for higher amounts.
- Education Loan
Secured education loans have repayment terms of up to 15 years. However, personal loans are available for specific education-related expenses. These loans can be used for any educational expense such as tuition fees, hostel fees, or purchasing equipment related to the course.
This category allows for small loans, but loan amounts up to Rs 20 Lakh are also possible. The repayment term can be as long as 7 years.
- Wedding Loan
Weddings can really impact one’s savings. Unexpected and unplanned costs can also occur. A bride’s or groom’s family member can apply for a short-term personal loan to cover wedding expenses. The amount could be as low as a few thousand, up to Rs 20-25 Lakh. The repayment term can vary depending on the amount borrowed. It can be as short as 3 months to 6 years.
- Travel Loan
Gen-Zers and Millennials love to travel. Today’s youth prefer to be able to make quick decisions, unlike previous generations who believed in saving enough to travel abroad. They can get travel loans if they have a steady source of income and a strong credit history. The applicant has the option to choose between a small amount, such as Rs 25000-50000, or a loan of 10/20/30 Lakh. The maximum loan repayment term is typically 6 years.
- Medical Emergency Loan
Although insurance is the best option to cover medical emergencies, a loan could also be an option. Medical emergency loans are a great option for those who don’t have insurance or can’t afford it. You can choose to borrow a small amount or up to 20-25 Lakh. Higher amounts may require a repayment term of up to 5 years.
Also read: Loan Against LIC Policy
- Loan for Debt Consolidation
You can also get a short-term personal loan to pay off multiple loans. Multiple loans on your credit report can be detrimental to your credit score. Many people prefer to apply for a Consolidation Loan to pay off their existing loans.
One advantage is the high interest rate on certain loans such as credit cards. An unsecured personal loan may have a higher interest rate than a secured loan, but it will still be subject to lower interest rates than a card loan. You can get debt consolidation loans up to Rs 25 Lakh.
- Pension Loan
Many financial institutions offer retirement loans. Sometimes, pensioners find themselves in a difficult financial position due to sudden high expenses, such as those incurred because of medical conditions. They can apply for a loan to help them pay their pension. They can borrow up to 8 times their monthly income and the repayment term can be extended to 5 to 6 years.
- Personal Loans for Small Businesses, such as Festival Loan
Some banks and NBFCs offer small personal loans to cover miscellaneous costs. Festival Loan is a popular personal loan. Festivals can often lead to unexpected expenses. A Festival Loan is an option if you find yourself in such a predicament. The loan amount can be up to Rs 50,000.
- Consumer Durables/White Goods Loan
White goods such as air conditioners, televisions, and refrigerators are usually very expensive. A Consumer Durables loan may be an option if you are looking to purchase multiple of these consumer durables. The loan amount could reach several thousand. Some banks and NBFCs offer insurance to make their deals more customer-friendly.
- Personal Computer/Mobile Phone Loan
Similar to the Consumer Durables Loan. Technology is advancing rapidly and there are many digital devices on the market. A personal loan is a short-term option for those who want to purchase high-end items but don’t have the funds to pay them off. You could also receive an EMI payment offer from the seller in conjunction with a bank, NBFC, or other financial institution.
- Used Car Loan
The Used Car Loan is a very specific type of personal loan that can be used to buy a second-hand vehicle. While some financial institutions may offer loans up to 100%, others may offer loans with attractive interest rates as low as 7.75% and a generous repayment term of 6 to 7 years.
- Bridge Loan
The loan is for a specific purpose. It has a very short repayment period, usually no more than 12 months. You have a short-term financial need, and the loan will help you meet that. The interest rates may be higher than for personal loans. A collateral may be required by some banks.
- Top Up Loan
Let’s say you have taken out a loan and now need another. As we have already mentioned, multiple loans can negatively impact one’s credit score. You can instead take a loan to cover the situation. Your bank will adjust the repayments of both loans under a single EMI.
Short Term Loan eligibility requirements
- Indian citizens are required
- A steady source of income is essential
- Between 21 and 67 years old is the ideal age
- Your CIBIL score should be 750 or more
See also: Personal loan eligibility criteria
How do I apply for a short-term personal loan?
- Do your research and find the best banks / NBFCs that offer personal loans at the most competitive interest rates.
- Learn about the loan processing fees and other charges that a bank/NBFC may levy on the personal loan you require.
- Apply online for faster results
- Your Aadhar Number will be required.
- Please provide details about the loan amount and the repayment term.
- Send the necessary documents to the bank.
- Wait for document verification. This should take place within 24 hours.
- Now you can receive the funds to your account.
