2 min read
25 May 2021

Financial institutions usually give short-term loans, generally for a period of 1-2 years. These are primarily unsecured, so you don’t have to pledge collateral as security to avail of them. Though funds can be extended quickly, they are labelled ‘short-term’ because of the associated repayment tenor (to be paid off in full within 6-18 months) rather than the speed of funding.

What differentiates such a loan from the other conventional ones in the market is the ease of getting one. However, many short-term loans in India offer you the funds you need to meet any small financial needs. Here, we try to cover the ins and outs of the five most popular sources of short-term loans to help you make an informed decision when it comes to availing of short-term finance.

1. Trade credit

This is possibly one of the most affordable sources of obtaining interest-free funds. You can avail of trade credit when a lender gives you the time to pay for a purchase without incurring any additional cost. Trade credit is usually extended for 30 days.

However, you can consider asking for a longer tenor that would easily fit into your plan.

A flexible repayment tenor will allow you to leverage the additional time and funds to finance other initiatives.

2. Bridge loans

A bridge loan will help to tide you over until you get another loan, usually of a bigger value, approved. In India, such a loan assumes importance in case of transactions relating to the property. For example, if you want to buy a new house but don’t have sufficient funds, the old one hasn’t been sold off yet. You might want to wait for the funds to come through once you get a potential buyer for the old property, but this will have its own downsides, including the price of the new property shooting up.

During this waiting time, you can avail of a bridge loan that offers two-pronged benefits. One, it helps you with the funds to buy the property while giving you ample time to wait and another, getting a good deal on the old one.

3. Demand loans

A demand loan can help you meet any urgent financial obligation. You can pledge your insurance policies and other savings instruments such as NSCs in lieu of the loan. A certain percentage of the maturity value on such savings instruments will determine the extent to which you will be eligible to borrow as the loan amount.

4. Bank overdraft

This is a facility that you can avail of on your current account. With an overdraft facility at your disposal, you will be able to withdraw money despite your account not having sufficient cash to cover such withdrawals. Essentially, it helps you to borrow money within a sanctioned overdraft limit.

Like any other loan, an interest rate (often lower than that on credit cards) is levied on the outstanding overdraft balance. However, be wary of certain additional costs attached to such a facility, including fees per withdrawal.

Additional read: How to apply for an overdraft

5. Personal loans

You can avail of a personal loan to meet various needs like home renovation, wedding, higher education or travel costs. You could also use a personal loan to meet a medical emergency or consolidate your existing one into one.

Many lenders offer a personal loan based on your income level, employment and credit history, and perceived repayment capacity. Unlike a home or car loan, a personal loan isn’t a secured one. This means that the lender will not have anything to auction if you default on repaying the loan amount. What differentiates a personal loan from all these aforementioned loans is that it gives you a substantial loan amount with a flexible tenor to facilitate repayment.

Bajaj Finserv offers India’s personal loans up to Rs. 40 lakh, which can be repaid in easy EMIs spread from 6 months to 96 months. These loans offer quick approval with money credited to your bank account in 24 hours*. You can also avail of the loan in a Flexi format and make unlimited withdrawals and prepayments. Here you don’t have to pay personal loan interest rate on the entire sanctioned loan amount, but only the portion of the loan you use, reducing your personal loan EMIs by up to 45%.

*Terms and conditions apply.

You can also use the EMI Calculator available on the website to find your exact EMI, tenure, and interest rate before you opt for a personal loan.

With pre-approved offers from Bajaj Finserv, availing of finance is a hassle-free affair. All you need to do is provide some basic details to know your exclusive pre-approved offer and avail of instant funding without the effort of queuing for lengthy applications or submitting multiple documents.

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*Terms and conditions apply