Need Cash Urgently? Here are Your Options
Short-term business needs and daily requirements can be very easily satisfied by the short-term loans. Short-term loan offerings by banks are generally for a period of one year or less than one year. The benefits of these loans are that they are processed pretty fast unlike traditional loans on homes. Although the globalization and privatization have reduced the time lag in loan processing it still is high as necessary inquiries before proceeding with a loan is essential in case of big loans. Contingencies and immediate fund needs can arise anytime. Short-term loans are extremely helpful in these circumstances. These loans can be given even for a period of three months.
Rationale of short-term loans
Proprietary businesses or retail businesses can require loans that may be on account of purchase of inventories or to meet the working capital requirements. Seasonality of business also sometimes creates situations where a retail businessman has to store stocks for which he might be in need of funds. Payment of bills or creditors is another important rationale behind taking such loans.
Nature of short-term loans
These loans are generally unsecured in nature. This is one of the biggest advantages of such loans. Unsecured in nature means that borrower doesn’t have to keep anything in collateral for these loans. However, the payment should be made as per the requirements of the bank or financial institution giving the loan. Failure on the part of a borrower to repay such loan invites a black spot on credit worthiness.
As the name suggests these loans are for individual needs and expenses. Reducing affordability, lower percentage of salary hikes, higher inflations are some of the key reasons why personal loans are getting so much attention and increase these days. These loans are also popular as they are mostly unsecured barring few instances where a collateral can be asked. The loan rates are generally higher compared to other loan rates that are for a period of 10-20 years. There are five major categories that come under the purview of personal loans.
Loans for Festivals
Family is the foremost priority of many individuals, but sometimes you may not have funds to fulfill your family dreams at the time of festivals. Personal loans provide a helping hand in such situations. The loan amount may differ from the bank to bank. The borrowed amount is to be repaid in Equated Monthly Installments (EMI).
Loan for Marriage
This is most popular in the society these days. Such loans are given considering repayment capacity, age of the borrower.
Borrowing for Purchasing Consumer Durables
Loans are also provided by financial institutions for purchasing consumer durables like TV, Hi-fi music systems and washing machines. The loan value ranges from Rs. 5,000 up to Rs. 200,000 in some cases. The maximum period of repaying the personal loans is a bit higher than short-term loans. These loans can be given for a period of five years.
Loans for Pensions
Retired persons sometimes find it difficult to access funds. These people are given loan under the banner of pension loans. Pension of the person is taken as the base while providing the loans. The loan amount is five to ten times of the last pension drawn by the pensioner.
Loans on personal computers and purchasing of laptops are also covered. Even if any software is required that is covered by the banks under such category.
Things to be Kept in Mind
A borrower is often not conveyed full information at the time of taking these loans. Sometimes the borrower is unaware of the calculation of interest repayment by the banks. Personal loan’s interest rates are calculated by two ways: one is the monthly reducing basis and secondly on annual basis. On monthly reducing basis, after paying a principal amount the further interest is calculated on the outstanding balance whereas in case of annual basis, it is on a yearly basis. Loan offers should also be kept in mind. Person should do an enquiry and check the lowest rates of interest and processing charges. Personal loans are at higher interest rates than interest rates on other loans. Therefore, the individual capabilities of repayment should be kept in mind.