Short-Term Loan for 3 Months: Key features and risks explained | Mint
Source: Live Mint
Personal loans have become quite popular in recent times as they provide instant loan disbursal and help you get financial assistance if you are in an emergency situation. These loans are usually unsecured and do not require collateral.
If you are looking to meet your short term financial goals and want to borrow a short term loan for 3 months, it is advisable that you understand its features as well as fees and charges before applying.
Features of short term loans
Fast approval and disbursal:Such loans do not take long to be approved, and most of them are processed usually within a few hours or even minutes. After the funds are approved, they are disbursed within 1-2 business days, which makes it convenient for you if you are in need of quick cash.
Unsecured nature:They are unsecured loans which means you do not have to provide any collateral to borrow the loan.
Improves credit score:If you repay the loan timely, you can easily improve your credit score and secure better deals on future borrowings.
Fixed tenure:A three-month loan is usually repaid as a lump sum within 90 days from the time the loan was taken, thus you can easily plan your repayment journey.
Higher interest rates:Since these are short term and unsecured loans, these attract higher interest rates as compared to long term loans.
Shorter commitment period:Since this loan is only for a 3 month period, hence, you do not have to worry about long term liabilities.
Drawbacks of short term loans
High interest rates:These loans are granted for 3 months. Hence, the interest rate which you may get will be even higher than regular personal loans.
Penalty charges:If you fail to repay the loan on time, your EMI will attract penalties and charges which increase your EMI amount resulting in increased financial burden.
Impact on credit score:These short term loans can impact your credit score if you fail to repay even one instalment on time. This can in fact impact your future borrowing.
Limited loan amount:These loans are offered with small amounts. Hence, if you want to borrow higher amounts, you may not be able to fulfil your requirements.
In conclusion, it is advisable that you choose your loan amount wisely and do not borrow more than you can afford. You must also explore other options before applying for the loan so that you can compare and choose the best option for you. If you have a higher credit score, you can get a low interest rate on your loan deal. With this, you can make informed decisions and avoid any unnecessary financial burden.
(Note: Raising a loan comes with its own risks. So, due caution is advised)
