Do you have a medical emergency that requires urgent funds? You need urgent working capital funds, while your receivables will be due in six months.
If you answered yes to any one of these questions, continue reading to learn more.
Short-Term Loans: What are they and what do they offer?
These loans can be used to cover short-term liquidity needs. They can be used for business or personal purposes. These loans typically have a repayment term of up to 5 years depending on the context.
These are the main characteristics of short-term loans:
- They have flexible repayment terms
- These loans are short-term and lenders can process them quicker, in some cases even without collateral.
- The short term of loans means that interest rates are higher.
- These loans can be approved quickly by financial lenders, which offer faster processing times and require less paperwork than other loans.
- This loan will improve your credit score if you make timely repayments. This helps you improve your creditworthiness and allows you to apply for larger tenure loans.
Short-Term Loans Available in the Market:
Personal loans:
Personal loans online are the most preferred type of short-term loan available. Personal loans are riskier for lenders as they are collateral-free. These short-term loans carry high interest rates, which covers this risk.
Based on your needs, financial lenders can offer personal loans in a variety of ways. These include mortgages, education, renovations, travel, and medical emergencies.
Overdraft Facility:
This facility is offered by banks and allows businesses to withdraw funds beyond their current account balance. You only need a current account with a sanctioned overdraft option to be able to access it for your business’s needs.
You can pay your vendors, while still waiting your clients to pay you. This helps businesses keep their working capital requirements under control.
Bridge loans:
In simple terms, bridge loans are used to bridge the gap between short-term cash needs and long-term loans. These loans come with high-interest rates and are secured with asset collateral such as the property.
Demand loans:
Individuals and businesses can apply for demand loans to cover short-term financial needs. These secured loans require collateral or security to be approved by banks and other financial institutions. Lenders will usually accept NSC’s, insurance policies, or fixed deposits for individuals. For businesses, they can use invoices, lease rentals, and accounts receivables to secure short-term financing.
Lenders agree with buyers to determine the term of the loan. Repayment can be made at any time during the tenure, and there are no prepayment fees. The repayment terms for Demand Loans can be flexible because there are no fixed EMI payments.
Finishing up
You should weigh the pros and cons of these loans. If you have reasonable assurance about the repayment terms, then short-term loans are a good option to improve your cash flow.
