The personal loan tenure is responsible for deciding whether your application is for short-term or long-term. With this basic financial knowledge, you can consider your available options in the market while making informed decisions. Your overall financial knowledge becomes even more important when you have to consider products or services like personal loans.

With leading financial providers like Stashfin, you can complete the personal loan application process seamlessly through the digital app. Moreover, if you meet the eligibility criteria, some lenders also offer the ease of applying for personal loans without any documentation. 

It is important to choose the right personal loan tenure when you are applying for this type of financial service. To understand the right loan tenure, you should know about short-term loans and their benefits. 

What is a Short-Term Loan?

A short-term loan is usually taken for a smaller period of one year when it comes to managing instant financial needs. The loan amount that is approved for short-term loans online will vary depending on the lender and the purpose for which it is taken. 

Borrowers can consider applying for instant short-term loans within 24 hours with the help of instant personal loan apps. As the loan is taken for a shorter period, the EMI that is calculated is quite affordable and offers the ease of repayment. Most businesses or individuals choose short-term personal loans online as it becomes easier to apply and receive instant funds without any problem.

A business usually depends on the steady flow of revenue. Instant short-term loans are effective financial tools when it comes to raising temporary capital to meet the day-to-day operational requirements of your business. There are several small-scale businesses out there across different industry verticals. For any business, there comes a point when surplus funds are needed for buying inventory, hiring more staff, or expanding in other locations. 

In such instances, instead of using the savings, businesses can opt for short-term personal loans. This type of loan is collateral-free and will require no security when it comes to loan approval.

Benefits of Choosing Short-Term Loans

Applying for a short-term loan serves as a safe choice as it involves minimal risk due to the limited amount that has been asked for. With the help of an online loan application, it is easier to apply for short-term personal loans with the help of some clicks. Some more benefits to check out are:

• Maintaining Cash Flow

It is important to ensure proper cash flow when you wish to minimize overhead expenses and operational costs, especially in a business. In case you are facing a shortage of proper cash flow, you can consider the option of applying for a short-term personal loan. This option saves businesses from going down during the low season while also minimizing the risk of shutting down.

• Improving Credit Score

When you go ahead with paying the EMIs on time, your credit score eventually improves. The amount for short-term loans is comparatively less than long-term loans. Therefore, there is a greater ease of paying back the loan amount in the case of short-term loans. There is a lesser scope of delayed payments in these types of loans.

• Handling Emergencies Effectively

If you are facing a financial emergency in your business, you should know of ways to handle the same. For instance, if there is a natural disaster, technical breakdown, connectivity issue, or equipment repair, you can apply for short-term loans to fund these emergency expenses.

• Handling Seasonal Demands

If your business experiences highs and lows during seasonal changes, you must know of ways to handle these fluctuations. In case extra seasonal products remain, your business will have to face dead stock in the long run. If you wish to cover up for this loss toward the year’s end, small cash loans can be highly effective in balancing out the expenses.

• Ease of Loan Approval

In a short-term loan, the loan tenure is quite short. Moreover, the loan approval process is also simple and straightforward. There is a requirement of less documentation. 

Disadvantages of a Short-term Loan

Some drawbacks to look out for are:

1. Early Repayment Penalty: With a short-term loan, you are expected to clear the loan amount quite early before the due date. Still, you can come across lenders who might impose prepayment penalties as the amount charged does not equate to profits. 
2. Effect on the Credit Score: In case you miss or fail to make the desired payment, it will bring down your credit score. Moreover, this might create problems for future loan approval.

Why Choose the Right Loan Tenure

Once the bank or the lender completes the verification process for your loan application and gives approval, the lender will define the repayment schedule. This schedule will include details like the loan amount, the loan tenure, and the interest rate. The loan tenure is the parameter defining the number of EMIs you are expected to pay until the loan amount is fulfilled.

The loan tenure is known to affect the interest rates and the EMI amount. It is important to choose the right loan tenure that fulfills your financial capabilities. You should look into the benefits and drawbacks of the loan option you choose to obtain the desired results.

Conclusion

With a short-term loan, you get a quick financial solution that meets your unique needs. This loan option also delivers fast approvals and minimal documentation. They are perfect for handling financial emergencies or dealing with temporary cash flow issues. It is important to understand the pros and cons of this loan option to ensure smarter financial decisions.