Short-term personal loans from banks typically have terms of between one and two years. Most of them do not need you to put up collateral so that you can get them. The phrase “short-term” refers more to the repayment tenure (to be paid off in full within 6–18 months) than to the speed with which funds may be extended.

The simplicity of this loan makes it stand out from the other loans available. However, there are a variety of short-term loans available in India that might help you cover unexpected costs. In this article, we’ll look at the pros and cons of the five most common types of short-term loans so that you can make an informed choice.

1.  International trade credit

To my knowledge, this is one of the least expensive ways to get interest-free savings. In the case of trade credit, the lender extends the due date for payment without charging interest. Standard terms for trade credit are 30 days.

However, you might ask for a longer tenure if it works better with your schedule. Having a payback term that may be adjusted to suit your needs will give you the breathing room to pursue other opportunities that need funding.

2. Interim financing

A bridge loan is a short term personal loan used as a stopgap measure until the approval of a larger loan. A property loan in India is crucial in the event of a sale or purchase. For instance, you haven’t yet sold your old home, despite your desire to purchase a new one, since you lack the necessary finances. If you find a buyer for your current home and then must wait for the funds to come through, the price of your new home might increase significantly.

A bridge loan has two advantages that might help you out during this waiting period. For one, it may help you save enough for the property’s down payment and closing costs while you patiently wait. Another benefit is that it can help you negotiate a better price when selling your current home.

3. Loans on demand

A demand loan may be used to pay for any unexpected need. Instead of using the money to pay back the loan, you may put up collateral such as life insurance or a non-qualified savings certificate (NSC). For this kind of loan, the maximum amount you may borrow is based on a predetermined percentage of the value of the instrument of the savings at maturity.

4. Fee for Insufficient Funds

Your checking account offers this service for your convenience. If you have access to an overdraft facility, you may make withdrawals even if your account balance is insufficient to support them. You may essentially borrow money up to your approved overdraft limit. The outstanding overdraft debt is subject to interest charges just like any other loan (albeit often at a lower rate than credit cards). However, there may be extra fees for each withdrawal that you make, so keep that in mind.

5. Individual Loans

Personal loans are available for a wide variety of purposes, including paying for expensive life events like home improvements, weddings, college, and vacations. Personal loans may be used for everything from unexpected home repairs to medical bills.

Many financial institutions may provide you with a personal loan if they believe personal loan repayment is based on your current and past work and credit status as well as your income. A personal loan is not backed by any tangible collateral like a mortgage or auto loan. If you fail to make your loan payments, the lender will be left with nothing to sell at auction. A personal loan is different from the other options because it lets you borrow more money and gives you more time to pay it back.

NBFCs provide the best personal loans in India, up to Rs. 40 lakh, with flexible EMIS repayment terms of 12 to 84 months. Borrowers may take advantage of the Rapid approval; funds are deposited within a day. Loan money is available in a way that lets you take out as many or as few payments as you want. Include any payments made ahead of schedule on your loan. With a personal loan, the interest rate applies just to the amount you borrow, rather than the whole amount for which you were approved. you take out, cutting your EMIS by as much as 45%.

NBFCs make it easy to be financed by providing pre-approved options. With only a few simple pieces of documents required for a personal loan, you may find out your custom pre-approval offer and get quick financing without the hassle of standing in long lines or completing several papers.