What Should You Know Before Applying for Short-Term Loans Online?

Financial crises can strike anytime, and you need instant money. Short-term online loans are a handy choice in such a situation, guaranteeing quick approvals and instant disbursals.

Before visiting any lender, knowing the key parameters of such easy online loans, including the eligibility criteria, repayment terms, and potential risks, is prudent. This blog will help you decide whether short-term loans online are the right monetary decision.

Know About Short-Term Loans

What Are Online Short-Term Loans?

Short-term loans are short-term, small-ticket, unsecured loans that borrowers can avail of for a short duration, typically ranging from a week or two to one year. Short-term loans are provided by an instant loan app and online lending portals; hence, they are extremely accessible and convenient.

What Are the Key Features of Short-Term Loans Online?

• Instant Approval and Disbursal
• Minimal Documentation
• Unsecured Nature
• Flexible Loan Amounts
• Higher Interest Rates
• Easy Accessibility

Points to Remember Before Applying

Before taking an online short-term loan, keep the following points in mind to make borrowing easy:

• Interest Rate and Charges: Lenders' interest rates are higher than traditional lenders'. Always verify the Annual Percentage Rate (APR) to know the true cost of the loan.
• Your Financial Situation: Evaluate your financial situation before taking a loan. Ensure you have sufficient funds to repay the loan in time to prevent penalties and debt accumulation.
• Lender Credibility and Trust: To prevent fraud, select a trusted and RBI-approved lender. Check reviews and ratings before applying via an instant loan app or website.
• Loan Term and Repayment Flexibility: Online lenders of short-term loans offer different repayment periods. Choose the period you can fulfil.
• Effect on Your Credit Score: Non-payment can harm your credit score. If you already have some pending loans, consider whether you need another one.

How Lenders Approve You for Short-Term Online Loans?

Lenders check several things before giving online approval for a short-term loan. Find out how do lenders assess your eligibility for short-term loans online:

• Credit Score: A good credit score (750 and above) increases the probability of approval and ensures a low interest rate.
• Income and Employment Status: The lenders verify whether you have a steady income to repay the loan.
• Debt-to-income Ratio: The less the debt-to-income ratio, the better you can repay.
• Bank Statements and Transaction History: In this case, a better history assures you get approved.
• Loan Repayment History: Payment of loans already availed of within time raises your creditworthiness.

What Are the Repayment Terms for Short-Term Loans Online?

Knowledge of the repayment terms for short-term loans online will save you from financial troubles. Here's what you should know:

Loan Tenure

• Short-term loans are repayable between 7 days and 12 months.
• Some lenders offer flexible tenure, and the borrower can choose repayment terms according to his/her financial ability.

EMI-Based vs. Lump-Sum Repayment

• Certain loans have an Equated Monthly Installment (EMI) pattern, wherein you repay in instalments every month.
• Others ask for a lump sum at the maturity of the loan tenure, which may be a financial burden if not managed carefully.

Prepayment and Late Payment Penalty

• Some lenders impose a prepayment penalty if you wish to repay the loan before the end of your tenure.
• A late payment penalty is costly, so timely repayment should be made to avoid extra fees and a negative credit effect.

Auto-Debit and Manual Payments

• Most of the fintech websites require that lenders choose auto-debit for convenient repayments.
• Others pay manually through UPI, net banking, or mobile wallets. Opt for a payment mode that ensures you never miss payment due dates.

Tip: Remember your repayment schedules and maintain enough balance in your account to avoid paying penalties.

Conclusion

An instant loan app is convenient and effective for meeting urgent financial requirements. Short-term loans are gaining popularity because they offer quick approval, less paperwork, and easy accessibility. However, before applying, borrowers must compare the interest rate, repayment period, and lender's reputation.

By knowing how lenders determine your suitability for easy online loans and having a good repayment plan, you can use these loans wisely and prevent debt traps.

Whether you apply through an instant loan app or order online through a digital lending platform like mPokket, borrow responsibly and opt for financial prudence over fleeting convenience.

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