Financial emergencies cannot be predicted. These emergencies include situations like sudden medical treatment, wedding expenses, etc. In such circumstances, an individual can opt for a short-term loan rather than draining savings accounts.
It comes with a reasonable repayment tenor that can go up to 60 months. However, when applying for this credit option, there are few things the applicant must consider.
Five things to consider when applying for a short term loan:
Other than meeting the eligibility criteria set by a financial institution, there are a few other factors that an applicant must consider when applying for a short-term loan. Keeping these things in mind will help avail maximum benefit on loan application:
1. Maintain a higher CIBIL score:
A good CIBIL score is a reflection of an applicant’s clean credit history. Usually, financial institutions expect applicants to maintain a CIBIL score of 750 or above. Therefore, any applicant with a lower credit score can check their credit history for discrepancies. A minor error can cause the credit score to drop considerably.
Also, try utilizing less than 30% of the set credit card limit to prevent a drop in credit score and stay up to date with all interest and EMI payments. Individuals with a low CIBIL score can also add a co-applicant with a regular source of income and a good credit score to increase their chances of loan approval.
2. Compare interest rates of different financial institutions:
Before applying for a short-term loan, compare the interest rates offered by different financial institutions. It will help select the NBFC personal loan with a comparatively lower interest rate. This assists in reducing the financial burden during EMI repayment and decreases the borrowing cost of a loan.
3. Evaluate repayment capacity:
Various factors affect an individual’s repayment capacity. One of these factors is the current income of the applicant. Individuals must consider their monthly obligations along with loan repayment. An applicant cannot have a debt to income ratio that exceeds 45 to 50%. Also, home liabilities shouldn’t be more than 35 to 40% of their income. It is crucial to assess these factors before sending a short-term loan application.
4. Consider opting for Flexi loan facilities:
Before any applicant considers Flexi loan facilities, they must understand what is overdraft loan is. This credit option helps individuals withdraw funds as per their requirements and pay interest for only the utilized amount. An individual can benefit from a Flexi personal loan by applying at institutions like Bajaj Finserv. The applicant won’t need to apply to withdraw from the sanctioned loan limit. Moreover, no documentation is necessary for withdrawing funds multiple times.
5. Purpose for applying for a short term loan:
Do consider the reasons to apply for a personal loan before submitting an application. Some common reasons to apply for a short-term loan include medical emergencies, higher education, wedding expenses, and debt consolidation. Therefore, chart down all expenses to help derive the required loan amount and assess repayment capacity. If the individual’s monetary requirements are unpredictable, they can opt for Flexi facilities on a short-term loan.
After considering these factors, when sending an application for a short-term personal loan, select institutions like Bajaj Finserv. They maintain 100% transparency and don’t impose additional charges on a loan application. Individuals can apply online and receive approval at the earliest.
Also, when applying online, opt for pre-approved offers to simplify the application process. These offers are also available on other products like business loans, credit cards, etc. To check your pre-approved offers, enter your name and credit card details.
Individuals applying for a short-term loan should also keep the necessary documents ready for the verification process. It will assist in receiving instant approval and ensure loan disbursal with 24 hours.