What is a short term loan?
Just like the name suggests, a short-term loan is a type of loan given for shorter repayment period. A short term loan is taken for a year or less compared to other average loan tenures. Short term loans in India are mainly used for business purposes by businessmen or SMEs. It can be used to fulfill sudden or unexpected money requirement or managing the cash flow during a momentary funds shortage. Businesses mostly use this type of loan for working capital needs or as line of credit.
What are the features of short term loans?
- Easy to get and quick disbursement of funds in short term loans.
- Tenure is one year or less.
- One can pay back a short term loan weekly, fortnightly or quarterly.
- The mode of repayment is decided by the lender as per the profile of the borrower.
- One need strong credit score to get a short term loan for business purposes.
- The business has to be at least a year old.
- The banks and NBFCs have specific criteria for annual turnover amount on which the short term loan is given.
- A short term loan as be a secured or unsecured loan, depending on the lending policies of bank or NBFC.
- The loan amount approved depends of the borrower’s needs, profile and lender’s policy.
- The interest rate for short term loan is similar with personal loans.
- The interest rates changes from lender to lender as per the profile of the borrower.
- One can get a short term loan by following an easy and simplified documentation process.
- Banks and NBFCs often offer customized short term loans for business purposes.