20,000 - 1 lakh 3 months - 1 year
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A short term loan can be defined as loan taken for a period of one year or less. These loans usually have greater flexibility of repayment within the stipulated tenure. While most banks offer loans for over 1 year, there are a few banks and NBFCs which are now experimenting with loans for shorter duration. This type of loan is very prevalent via individual lenders, which is primarily unorganised with interest rates of over 100%. However, now via Cashkumar, we have individual lenders offering short term loans for shorter duration and affordable interest rates.
Interest rates could vary based on the profile of the person as well as the institution/individual from whom the borrower is taking a loan. The typical interest rate for a short duration could be around the 1.5% per month i.e. 18% per annum. However, these rates could go much higher as the borrower does not feel the pinch since it is a small amount. Let us illustrate this by a simple example.
Person A wants to borrow a Rs. 10,000 for a period of 30 days. He is willing to pay around 11,000 at the end of 30 days. The deal looks lucrative, as the borrower gets the money that he needs and is comfortable paying Rs 1000 extra after a month. This however is a 10% interest rate for a month, which is close to a 120% on an annualised basis. This is the interest rate at which some loan transactions happen. This is all getting normalised on our platform as we cap the maximum interest rate to ensure sanity in the system.
Rajesh was working in one of the reputed companies in Bangalore. For his son's graduation, he wanted to gift him a bike which was around 75,000 of which he had 35,000 and needed around 40,000. Rajesh was not keen on applying for a Personal Loan with a bank, as the tenure being offered was a minimum of 1 year. He was looking for a 6 months loan to close it quickly. That is when Rajesh explored an option of a Short Term loan where he got offers right from 1.5% per month to 5% per month. Rajesh was expecting a bonus in the near future and was also keen on an option of pre-closing the loan even before 6 months or choosing a 3 months loan. But with Cashkumar, providing him an option of pre-closure with zero charges, he took a 40,000 loan from a few individual lenders and returned a total of around 43,000 over a span of 6 months. This worked well in his favour as he did not have any obligations and at the same time he fulfilled his son’s desire of getting a bike.
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As things stand in the Indian financial system, there is a huge need for short term loans as these are not catered to by banks and NBFCs. Short term loans are a separate category with amounts ranging from Rs 10,000 to Rs 2 lakh with tenure between 1 and 12 months. Banks and NBFCs usually have a minimum cap of Rs. 1 lakh while giving a loan which is an impediment for people seeking lower amounts. Some NBFCs advance lower amounts but either the interest rates are too high for the loan tenure fixed. Short term loans or short term finance is especially useful in the following cases where:
A personal loan which is short term in nature taken under the peer to peer lending model accrues the benefits of both shorter tenure as also crowdfunded loans. These dual benefits are tailored to the exact requirements of many borrowers across India. Some of the major points which would delight borrowers include:
