A short term personal loan is a personal loan with a brief repayment tenure. The tenure can range from three months and may extend to 12 months, although the average duration is five months. But why would someone opt for a short term loan? Given below are a few reasons for the same-
Urgent home renovation or repairs like leaky taps or a faulty heater.
A medical emergency like a car accident or immediate surgery.
Wedding expenses like paying the caterers or buying jewelry.
An outstation trip for a relaxing weekend or demise of a relative.
Reasons may vary, but a short term personal loan takes care of all of them. Financial experts and advisors only recommend taking a short term personal loan when you have exhausted other options. Their advice is based on the fact that the interest rate of a short term personal loan from a bank has higher rates of interest than other types of loans.
However, the higher rates of interest also bring along the need for a higher credit score. A bank only gives you a loan if you have a credit score above 700 (for a CIBIL score). Anything below that leads to loan rejection. A loan rejection can also harm your credit score. So if you want a short term personal loan on your terms such as a CIBIL score of 600 or above you can approach online short term loan lenders or instant loan lenders.
With the advent of technology, it is now possible to take an instant loan which is very similar to a short term personal loan but better. An instant loan is the advances and better version of a short term personal loan. The approval rate is higher since people with lower CIBIL score are also approved for the loan. Plus as the name suggests the loan is instant. You can apply for a loan today and get it within 24 hours! Compare this to the weeks a bank takes to approve your loan and disburse your loan. An instant loan also has a comparable rate of interest with a short term personal loan.
Check your own CIBIL score- Even though online lenders give an instant loan to people with a low CIBIL, if your CIBIL is very low (below 600) then you will be rejected by the lender. This can cause a hard inquiry on your credit profile. Moreover, if your CIBIL score is high (above 800) then you can bargain a lower rate of interest.
Research and compare- Look for companies that give an instant loan in your country. Make a list of all the companies that do. Check the cities they provide a loan in. If your city is included in their list of cities, there is a higher chance of getting a loan from them. Once you have the companies that give an instant loan in your city then compare the rates of interest. Choose the top three companies that provide a lower rate of interest that also functions in your country.
Check eligibility criteria- You have researched your credit score, the best three instant loan lenders in your city, but you still get rejected because you skipped the eligibility criteria. The eligibility criteria include the minimum and maximum age, Indian residency, and the minimum salary you must get in-hand to be eligible for the loan. If you fail either of the criteria your chances of rejection increase.
Application process- An average application process includes downloading an app and filling in your personal information. Uploading the documents, a phone call from the lender to confirm your eligibility, and approving or rejecting the application. If your details are unclear and in the incorrect soft-copy format then the rejection increases. If the lender cannot access your documents to verify them, then they will not give you a loan. It’s always best that the files or images you send are clear.
A very simple rule of thumb is to only borrow an instant loan from an NBFC or a bank.