Short term loans come in handy when you don't have much time to get the comparatively longer time involved in getting the usual loan sanctioned and disbursed from different financial institution. These help you cater to uncalled for financial exigencies such as medical crisis, salary delays or other such crisis situation at hand. While if you go by the ideal financial planning exercise, you should always aim at building a contingency corpus to tide away such times, but this is easier said than done.
Some of the short-tenure loans which are available instantly can be availed depending upon one's future financial goals and current needs:
1. Loan from the employer: Some of the companies extend such a facility to their employees wherein they can borrow funds at a cheaper rate of interest or at zero interest for a short term. Such advances are then adjusted against a person's salary on a month-on-month basis until such loan benefit is totally cleared by the employee. However before seeking such a loan, you need to look at the taxation aspect.
2. Loan against PPF: PPF withdrawal and loan provisions have been made softer over the years in view of the complexities faced when it comes to managing finances. So, in case you have the PPF account, you can take personal loan against the balance in the account from the 3rd financial year up to 6th fiscal year of the PPF account opening date.
There is a limit of loan that can be availed against this investment instrument of maximum 25% of the balance as at the end of the second financial year just before the year in which the loan application was made.
The interest rate charged for loan against PPF is 2% higher than earned on the balance amount in the account. Also, it has to be paid back in 36 months time and in case the repayment is still due to be made thereafter then interest rate i.e. 6% more than that is earned on the balance is charged. In comparison to personal loans that are charged 14-21%, loan against PPF can be availed at less than 10% interest rate.
3. Loan against mutual funds: Now some of the institutions such as HDFC bank is extending loan on an instant basis through online route on pledging of mutual fund units. It is to be remembered that while both debt and equity-based mutual funds can be hypotheticated with the lender as collateral, only some of the fund types qualify for the loan facility. The biggest advantage with this short term loan offering is that the processing time is minimal and also individuals with no past credit record can apply for such a loan and avail the funds easily.
Among all other short-term loan offerings, this loan is of secured nature in contrast to others.
4. Payday loan: It is another short-term loan that has evolved in light of the need of the hour. The tenure of such a loan ranges from few days to say some months. And typically, such a loan is extended at a rate higher than the personal loan interest rate or loan against credits cards i.e. 15% to more than 25%.
Small amounts can instantly be credited after you make an application by uploading few of the required documents such as copy of PAN card, salary slip, bank details etc.