5 Types of Short-Term Loans in India
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5 Types of Short-Term Loans in India

  • Highlights

  • Trade credit is interest-free and is usually extended for 30 days

  • Bridge loans are useful while you’re waiting for another loan

  • Demand loans can help when you need urgent financing

  • Personal loans offer a high loan amount and can be used for many purposes

Short-term loans are usually extended by financial institutions generally for a period of 1-2 years. These are mostly unsecured, which means you don’t have to pledge a collateral as security to avail them. Though funds can be extended quickly, the reason why they are labeled “short-term” is 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 availing one. However, there are many short terms loan in India offering you the funds you need to meet any short-term financial need. Here, we try to cover the ins and outs of the 5 most popular sources of short-term loans, to help you make an informed decision when it comes to availing short-term finance.

1. Trade credit

Possibly one of the most affordable sources of obtaining interest-free funds, you can avail a trade credit where the lender would give you the time to pay for a purchase without incurring any additional cost. A trade credit is usually extended for a period of 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 till the time you get another loan, usually of a bigger value, approved. In India, such a loan assumes importance in case of transactions relating to property. For example, if you want to buy a new house but don’t have sufficient funds because 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.

It is during this waiting time that you can avail a bridge loan, that offers two-pronged benefits- it helps you with the funds to buy the property while giving you ample time to wait and get 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.

Personal Loan Features & Benefits

4. Bank overdraft

This is a facility that you can avail 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.

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

5. Personal loans

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

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

Bajaj Finserv offers India’s fastest Personal Loans up to Rs.25 lakh that can be repaid back in easy EMIs spread from 12 to 60 months. These loans offer instant approval with money credited to your bank account in 24 hours. You can avail the loan in a flexi format and make unlimited withdrawals and prepayments on your loan. Here you don’t have to pay interest on the entire loan amount that is sanctioned, but only the portion of the loan you use, reducing your EMIs by up to 45%.

With pre-approved offers from Bajaj Finserv, availing 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 instant funding without the effort of queuing for lengthy applications or submitting multiple documents.

Personal Loan Instant Approval

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