Do’s and Don’ts of a short term personal loan

A short term personal loan is a relatively new service/product in the Indian loan industry. However, it is a very successful service in the US and the UK. A short term personal loan is a high-interest loan with a brief repayment tenure. The tenure can range from 92 days to 12 months, which depends on the lender.

Traditional Vs. Unconventional

When one thinks of a loan, only the traditional lenders come to mind- a bank or an informal lender like friends and family. However, the up and coming player in this industry are online lenders. Ever since the lockdown, people have become dependent on digital stores for their needs. From social distancing to safe delivery, the digital sphere has met the challenger of the pandemic. Offline and traditional players had no option but to adopt an online approach too. The need for online access has also made the loan industry to go digital, however the fintech companies and the NBFCs that had an established online clientele. Therefore they saw steady growth during the pandemic too. The old players of the digital field have an advantage over the giants who will enter the market now. Digital lenders have gained the trust of consumers and know the demands and pain points of online consumers.

Moreover, an online lender is empathetic and flexible. These qualities differentiate them from the loan conglomerate who treats you as a statistic in their monthly reports and not as a human with their individual needs.

The do’s of a short term personal loan

Since the online loan industry may seem intimidating if it the first time you are borrowing money online. The following checklist will simplify the process of online short term loan/instant loan application, approval, and repaying the short term personal loan

• Research your lender and only apply for one who provides service in your city.

• The online lender should have a website with details about the company, the address of the company, a contact number, and the NBFC status of the company. Many lenders function in association with an NBFC or themselves are an NBFC. An NBFC is a non banking financial company that is certified by RBI to give loans.

• Check the eligibility criteria of the lender and whether you pass them or not.

• It is wise to know the minimum requirement of the CIBIL score. Some companies have strict guidelines concerning the minimum CIBIL score required to give a loan to a person. However, some have a flexible protocol. However, in this case, the rate of interest is higher than usual.

• Submit all the required documents to decrease the time between loan application and loan disbursal.

• The documents submitted should be clear. It makes it easier for the lender to check the details required for a successful loan application.

• Repay on the day agreed upon while you signed up for the loan.

• Deposit the loan amount into the official bank account or e-wallet. It is to avoid confusion and efficient for you and the company.

The Don’ts of a short term personal loan/instant loan

It is a good idea to know what to do but a great one to avoid the mistakes you can potentially make. Minimize the errors on your part while applying for a short term personal loan/instant loan by following the given checklist-

• Do not apply for multiple loans at the same time. It can have detrimental effects on your credit/CIBIL score. It will, in turn, hurt your loan application approval.

• Defaulting on your loan repayment is not advised.

• Take a rollover loan. A rollover loan is an extra loan on top of an unpaid loan. It can trap you in a debt cycle.

• A short terms personal loan from a company based out of your country is not a good idea. Since the laws and regulations for a loan differ from one country to another country, it is not a good option.

• Forging documents to pass their eligibility criteria is a criminal offense. It can lead to lawsuits, which is a highly uncomfortable and unpleasant situation. Never forge or modify your documents.