All You Need To Know About Short Term Loans

In life, from time to time, we might encounter a shortage of funds to meet some unforeseen financial obligations or even unexpected immediate financial emergencies.

That's where short term personal loans can prove quite useful. Basically, short term personal loans are loans that can be repaid within a one to two-year period. Short term personal loans are unsecured loans and as such, it is not required by you to post any sort of collateral as security.

The funds are credited to your account quickly after the loan gets approved. However, it's important for you to note that the term "short term" is not due to the speed at which the funds are disbursed but the limited tenure for repayment.

When you opt for a short-term loan, the money outflow that goes into paying the total interest is significantly lower compared to a long-term loan. As a result, a short-term loan is cheaper than a long-term loan.

First things first, let’s get clear on what a short-term loan is. Unlike traditional loans, which you pay off over several years, short-term loans are designed to be repaid within a few weeks or months. They’re typically used for small amounts and are meant to cover urgent expenses.

Several types of short-term loans are available online, catering to various financial needs. Here are the main types:

Payday Loans: Payday loans are small, unsecured loans intended to cover urgent expenses until your next paycheck. They come with high interest rates and must be repaid quickly, usually in a month.
Personal Loans: Personal loans can be used for various purposes, such as medical emergencies, travel, or home repairs. These unsecured loans are quick to obtain, often with minimal documentation, and have repayment periods ranging from a few months to a couple of years.
Instant Cash Loans: Instant cash loans are designed for immediate financial needs. These small, unsecured loans are approved and disbursed within a few hours, making them ideal for urgent situations.
Credit Card Cash Advances: If you have a credit card, you can withdraw cash up to a specific limit. This option provides quick access to funds but comes with high interest rates and transaction fees.
Loan Against Credit Card: Some banks offer short-term loans against your credit card’s available credit limit. These loans are processed quickly and offer flexible repayment options.
Buy Now, Pay Later (BNPL): BNPL services allow you to make purchases and pay for them in instalments over a short period. This option helps manage cash flow without requiring immediate large expenditures.
Each type has benefits and should be selected based on your financial needs and repayment capacity.

Once you understand short-term loans online, the next question that comes to your mind is, what are the pros and cons of getting a short-term loan online compared to other options? Here are some of the advantages of getting a short-term loan.

Lower time to incur interest

Given that short term loans need to be paid off within about a year in most cases, the total interest payments are lower too. Especially when compared to long term loans, the interest amount you pay is considerably less.

Faster funding time

Due to their shorter maturity period, short term loans are less risky than long term loans. This is because a borrower's capacity to repay the loan is less likely to change much over the short timeframe. As a result, the time taken by a lender to underwrite process the loan is shorter, which means you'll be able to obtain the needed funds more quickly.

Easier to acquire

Short term loans can be very useful for those who have below-par credit scores as the requirements are usually easier to fulfil. That's partly because short term loans are generally taken for small amounts.

The main disadvantage of a short term loan is that it's only for small amounts. This is so that the borrower won't be burdened with large monthly payments, thanks to the loans involving smaller amounts that are repaid sooner. 
However, some trusted digital lenders, like mPokket, offer loans of up to ₹2 lakh with flexible repayment options, helping borrowers avoid financial pressure.

There are two different ways to go about applying for short term loans online and below, we take a look at them:

Website

If you're using a desktop computer or kiosk, you can head over to the lender's official website. Once there, click on the section marked for loans and from the different types of loans it presents you, select short term loan. 

You then have to complete the application process online, providing the required details. The documents required such as ID proof, address proof and income proof can be submitted online.

Apps

This is fast becoming the preferred way of applying for short term loans due to the proliferation of smartphones among the population. Usually, the lender's application can be downloaded from the Google PlayStore or Apple app store.  

The entire loan application process can be completed using the mobile phone only. No physical documents need to be submitted and the customer does not need to visit any place to get the loan approved and disbursed to his bank account.

Getting a short-term loan online is pretty straightforward! Here is the answer to what factors should you consider before applying for a short-term loan online.

• You must be an Indian resident
• You must be currently employed for at least the last six months
• You should have professional experience lasting over a minimum period of one year
• You need to be employed with a private limited company or public sector undertaking. The latter includes central, state, and local bodies.
• Your minimum income should be Rs. 20,000 per month at least. And if you happen to reside in Delhi or Mumbai, your monthly income has to at least Rs. 25,000.
• You must be between 21 and 60 years of age.

You need some basic documents in order to obtain a short-term loan. These usually include:

• ID proof
• PAN Card
• Proof of residence (Passport/Driver's license/Voter's ID/Phone or Electricity bill)
• Last three months' statement of bank where your salary is credited
• Last three months' salary slips
• One passport-size photograph

However, do note that the documents needed can change from one lender to the next, so ensure you check with your lender which specific documents will be needed from your end for getting short term loan.

Getting a short-term in India can quickly and conveniently handle unexpected expenses, but it’s not without risks. By understanding the pros and cons, researching, and having a solid repayment plan, you can make the most of this financial tool without falling into a debt trap.

mPokket offers multiple short-term loans online. Our unique approach provides instant digital personal loans to users without needing a credit score. With a 100% digital process, we ensure a swift and hassle-free application experience. Whether you need a personal loan in Hyderabad or any part of India, you can rely on mPokket for various financial solutions, including a loan for low salary.

Remember, the key to using short-term loans wisely is to be informed and prepared. So, next time you find yourself in a financial pinch, you’ll know exactly what to do. Happy borrowing, and stay financially savvy!