New Delhi: If you want some quick cash for a dream holiday, to upgrade from your old laptop or pay your long-standing credit card bill, you may want to look at a short-term loan. These are personal loans that can be availed for usually less than a year. Interest rates, however, are on the higher side as the duration of payments is short. Despite that, this financial instrument is much in vogue due to easy approval and minimum paperwork involved as compared to traditional bank loans.

A look at the types of short-term loans that you can avail in India:

Personal loans: The good old personal loan is perhaps the most popular of the short-term loans offered by banks. The minimum amount most lenders offer as a personal loan is 30,000. Interest rates are higher than the secured bank loans. The equated monthly instalments, or EMIs, are tailored according to the borrower’s salary, so that she doesn’t miss payments.

Payday loans: Payday loans have become popular in India in recent times. The amount offered here is usually smaller than a personal loan, but the cash is instantly made available to the borrower. One just need to upload the salary slip, Permanent Account Number (PAN), bank account number and few other details to avail the loan. The loan gets credited into the borrower’s bank accounts within a few hours or a day at the most. The hassle-free application procedure and instant availability have made payday loans popular among youngsters.

Bridge loans: Bridge loans, or swing loans, are short-term loans aimed at tackling your immediate cash needs. Also known as “gap-financing", one applies for bridge loans when money is needed but not available. If you are waiting for a long-term home loan to buy a property and need some quick finance for the downpayment of that property, bridge loans is an ideal option. However, the loan processing fee and interest rate is higher compared to traditional loans.

Also read: If you need money fast, who will you call?

Loan against credit card: If you are using a credit card, you can avail a pre-approved short-term loan against it. Considering your credit card history and credit limit, several banks offer this type of loan. Processing fee starts from as low as 500 and the interest rate is anywhere between 12% and 25%, depending on the bank. The repayment tenure is mostly flexible, ranging from three months to 24 months.

Demand loans: Demand loans come in handy at the time of a financial emergency. Both banks and non-banking financial companies (NBFCs) offer such loans against insurance policies and small savings instruments, such as national savings certificates (NSCs). The loan amount depends on the maturity value of your savings instruments. Banks usually offer loans up to 70%-90% of your savings value.

Also read: How to make the most of your PPF account

Loans against PPF account: Short-term loans are also available against public provident fund (PPF) accounts, albeit only from the third financial year of opening the account. A borrower has to submit the passbook of her PPF account and Form D to avail the loan. Loan amount can be up to 25% of the balance available at the time of applying the loan. The loan is available till the sixth financial year of opening the account and repayment tenure will be maximum three years.

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