Have you ever felt a sudden need for money in the recent past? If yes, how did you manage to meet the requirement? Well, if you ever face a similar situation in the near future, you can – among other things – raise a small amount of personal loan from a bank or a non banking financial corporation (NBFC).
A personal loan is an unsecured loan offered by a financial institution to borrowers who urgently need money at the drop of a hat. It could be required for anything ranging from a personal emergency to buying a luxury item for a loved one to going on a vacation or arranging a wedding.
A personal loan can be repaid in a short term, say one to 18 months, or over a long period, say five years. Here, we give more details on short-term personal loans, which are typically repaid between 1 and 18 months. So, a short-term personal loan, as the name suggests, is a variant of a personal loan that is repaid in a short span of time.
If you are planning to raise a personal loan for a short-term, you should be careful about a number of things. Here we give a lowdown on the key questions with regard to short-term personal loans:
What is a short-term personal loan?
A short-term personal loan is an unsecured loan that is usually repaid within a period of 1 to 18 months. It’s used for instant financial needs and is often quicker to obtain than traditional long-term loans.
What is the purpose of loans?
First of all, make sure that the purpose of the loan is such that it falls in the category of a personal loan. For instance, if you need money to buy a car, you might as well take an auto loan. Otherwise, you can simply take a personal loan.
Should you use a credit card or raise a personal loan?
If the amount is too small and you have to use the money to buy from a merchant where you could use a credit card – then you could use the card instead of raising a personal loan.
For instance, if you need ₹2 lakh to buy a laptop, instead of taking a personal loan for six months, you could use your credit card and make the payment in equal instalments spread over the next six months. However, you need to check with your bank beforehand.
What is the interest rate charged?
Another key factor that matters is the interest rate that is charged by the bank. Since different banks, NBFCs and fintech platforms charge different rates of interest, you could opt for the one that offers the best deal to you.
What are the eligibility requirements?
The eligibility to raise a short-term personal loan includes regular income, PAN, bank statement, form 26AS and salary slips for the past three months.
Is there an alternative available?
Another question you need to ask yourself before taking out a short-term personal loan is whether you have any other alternatives available. For instance, could you borrow money from a friend without having to pay any interest on it?
Also, if you have an outstanding personal loan, you can simply take out a top-up personal loan at the same interest rate.