Short Term Loan: How to take at Home? - Phocket

 

While taking a loan to tide over a financial crisis is not always the desirable solution, there are times that we simply cannot help. It may be a medical emergency or a job loss or payments related to credit cards that you simply can’t pay off at one go.

A relatively better solution to tide over such crises is to take a short term loan. A short term loan has a lower interest rate than credit cards and it is easier to pay off a loan than it is to resolve credit card debts. 

Further, since short term loans are much more relaxed than a long-term line of credit, it is, therefore, easier to be approved, making it perfect for business owners and entrepreneurs as well as salaried employees. 

And specifically in the current scenario of ‘work from home’, the online loan apps are a great way to apply for and receive a short term loan from the comfort of your home!

Short Term Loan

According to finance experts, a short term loan is a line of credit that is obtained for a short tenure to meet sudden need of capital or funds. Obtained for a short period, such loans are typically more suitable for sudden financial emergencies rather than capital investment. 

Similarly, unlike secured loans like business loans or home loans, short term loans are unsecured in nature as they do not require any type of collateral. The loan amount is also smaller than conventional loans, while the schedules of loan repayments are much more flexible. 

Types of Short Term Loan

Here are some of the major types of loans:

Merchant cash advances

These advances typically work as a short term loan, even though they are advances. The shop owner or merchant borrows money from the lender as a lump sum amount and agrees to pay a percentage of the sales to the lender. So each time a customer buys something from the merchant, a percentage of the sale goes in the repayment of the loan amount.  

Lines of credit

A line of credit is typically like a business credit card that can be used by a business for a short period of time. The borrower only pays interest on the amount that has been taken out from the line of credit and not on the entire sum approved. 

Payday Loan

A payday loan is a type of short term loan whose loan tenure usually depends on the lender’s discretion, although both the loan amount and the tenure are smaller. The higher the salary package, the higher is the sanctioned amount. But the problem with this type of loan is that the entire loan amount plus the interest charges must be paid when the payday comes. 

Online or Instalment Loans

These are also short term finance loans that are usually approved via online portals and apps. No physical check is required for such online or instalment loans. The loan application time is very short and the funds are transferred quickly to the account of the borrower. 

Invoice Financing

These loans are given in lieu of unpaid invoices or debtors. When the borrower receives the money from his debtor, he has to repay the loan with interest to the lender. 

Eligibility Criteria for Applying

Here are the main eligibility criteria for short term loans:

Credit history

Most lenders will look at credit history. However, there are some lenders who will overlook the credit history and give the short term loan with a high processing fee and a higher interest charge.

Credit Score

Most private lenders call for a minimum credit score that is maintained by various credit rating agencies. However, there are private lenders who sanction loans to borrowers despite having low scores. Interest charges will, of course, be higher.

Documents Required

The best part about short term loans is that they require the minimum amount of documentation. Here are some of the documents that are typically called for sanctioning short term finance loans:

• Payslip or salary slip in order to determine your take-home salary.
• Six months’ bank statement to ensure that monthly salary is credited regularly to your bank account.
• Identity and residential proofs to ensure your background and credentials checks.
• Some financial institutions may ask for additional documents such as Aadhar and PAN cards. 

Advantages of Short Term Loan

There are indeed several advantages of short term loans:

• The documentation required is minimal. 
• You do not need to put forward any collateral.
• Furthermore, the time taken for a loan application is much shorter than that taken for long-term loans from banks and other mainstream credit institutions.
• Loan repayments are also easier for such loan options. This is due to that fact that such loans are usually considered as unsecured loans. The amount sanctioned is not high. Therefore, loan repayment requirements are also much more flexible than conventional or long term loans. 

Disadvantages of Short Term Loan

While undoubtedly short term loans can help you tide over financial crises, there are a few disadvantages:

• The processing fees and the interest rates are typically higher in short tenure loans.
• If you default on loan repayment, the penalty charges are much higher in the case short term loans than other conventional bank loans
• Short term loans are not good for long term financial crises which require a higher credit line or a bigger amount that is usually not available with short loans.

How Phocket Works?

With the current pandemic situation, most people are working from their homes and when a financial emergency arises, the most practical solution is to go for an online short term loan. 

Online loans also help borrowers to safeguard themselves from physically visiting a bank branch and exposing themselves to the potential risk of virus transmission. 

Phocket is one of the leading online loan providers in India. We are known for our easy online application process, approval, quick disbursal, data protection, fast and reliable services, transparency and low interest rates. 

We at Phocket provide short tenure loans for all types of financial requirements. Our loan tenures are flexible and our eligibility criteria are simple. We provide a wide range of loans – all of which are provided based on simple credit score check and verification of credit history. 

If you are facing a financial crisis in the short run, we are there to help you with your credit needs. Whether it is a medical emergency or inability to pay credit card bills, our product offerings are there to help you out. 

With more than 25,000 loans processed, and over Rs 45 crore disbursed, Phocket is redefining the way credit transactions work in this country. Call our customer service centre today to know more about our products.