Pros And Cons Of Different Quick Loan Options For You

When a financial emergency strikes you need money, and you need it immediately. And, if you are in a situation where you are short on cash, a quick loan can come in handy to help you tide over that situation and save the day.
There are various types of quick loans in the market that you can opt for. These include personal loans, credit card loans and quick, no-credit loans, to name just a few.
So, which one of these quick loans is best for you?
The best loan for you will depend on the amount of money you need and the purpose for which you need it, your circumstances, your credit history, and how flexible would you like the repayment process to be.

What Are Quick Or Short-Term Loans?

As the name suggests, these are loans that require the least processing time and minimal documentation work. These are mostly unsecured loans that can be usually taken without collateral.

Key Features Of Short-Term Loans

Eligibility:

A quick loan is usually offered without collateral solely on the basis of a person’s employment status, income and credit history and rating.

Loan Amount And Tenor:

These loans are unsecured and, therefore, the lenders have to bear a very high risk. So, they are lent for relatively small amounts for short periods of time that can range from a few months to a couple of years.

Interest Rates:

Since these loans require no collateral, lenders charge a higher interest rate than on collateralised loans that are backed by real estate, gold, shares, fixed deposits, insurance annuities or any other assets of value.
 

Who Offers Short-Term Loans?

Several banks, peer-to-peer lending companies and non-banking finance companies offer these quick loans.

Different Types Of Quick Loans

Personal Loans

These are unsecured loans that need very little documentation and can be disbursed very quickly, often in a matter of hours if all the KYC documents are in place and the lender is convinced of the creditworthiness of the borrower.
These loans can be applied online and from anywhere in just a few clicks. They can be availed by any self-employed or by a salaried resident of India. Interest rates typically vary from lender to lender and also on the amount of money that is being loaned. Typically, well-established lenders offer more competitive rates of interest than smaller ones.

Bad Credit Or No-Credit Loan

This is for those borrowers who do not have a great credit history to boot. They can typically get quick loans just as smoothly, albeit with a higher interest rate.

Credit Card Loan

Credit card loans can typically be taken at attractive rates of interest as long you have a good, clean record of repayments and also have a sound credit history and a high CIBIL score.
Since this loan is offered on your credit card, the lender already has all your details and usually does not need any more documentation to approve such a loan.

Gold Loan

Unlike a personal or credit card loan, a gold loan requires collateral in the form of gold jewellery or coins. But like other quick loans, gold loans also require minimal paperwork and are usually sanctioned within hours.
Moreover, gold loans may carry a lower interest rate than some other options such as credit card debt.

Main Advantages Of Short-Term Loans

They’re Quick:

This is a no-brainer. As the name suggests, these loans can be applied online, the details are quickly verified, need very little documentation and can be disbursed very fast.

No Collateral:

As these are unsecured loans, no collateral is needed to avail of them. These loans can be taken with just a few clicks as long as the lender is satisfied that the borrower has a low chance of defaulting on them.

Insurance Cover:

Some of these quick loans also offer personal accident cover and other forms of insurance to the borrower. These insurance covers can be availed free of charge or at very affordable premium rates.

Simple Process:

These loans are simple to apply for. All you need to give is some basic information, including your KYC details, and the lender will be able to pull out your details and ascertain your creditworthiness for such a loan.

Credit Score:

Even people with a bad credit history can get these loans. You don’t necessarily have to have a very sound credit history to get these loans. You can get them even if you have a chequered credit history or a poor credit score, although you will have to pay a higher rate of interest than someone with a good credit history.
However, borrowers should be cautious while availing of these quick loans, as they can come with some red herrings.
 

Main Disadvantages Of Short-Term Loans

Higher interest rates:

The biggest disadvantage of such loans is that they charge higher interest rates than other loans where a borrower needs to offer collateral. The rates can vary from 10% to more than 30%, so avail these loans only when you have no other option left.

Penalties And Charges:

While getting these loans is easy, you can be charged heavy penalties if you do not repay on time or do not stick to your repayment schedule for the entire duration of the loan.
Moreover, even while availing of these loans, you should read the fine print carefully as some lenders could charge you very high processing fees as these loans are high risk and not backed by any security.

Conclusion

Short-term loans or quick loans are usually unsecured personal loans that don't require you to put up any asset as collateral, except in the case of gold loans.
Even though quick loans carry a higher interest rate than other types of debt, these loans can help you navigate a cash crunch with ease.
Banks and non-bank lenders such as IIFL Finance typically process these loans in a short time. IIFL Finance, for instance, processes gold loans within 30 minutes and personal loans within five minutes. So, if you need money to meet any emergency requirements, short-term loans will be suitable for you.