• 6 Month Loans

    No matter how thorough your plan are, there is always the unexpected which stares you in the face. During times of emergencies and untoward incidents, there is only so much you can do to meet your financial needs. And there are limited resources you can count on in terms of meeting your requirements. Your salary and savings might come in handy but may not suffice to deal with unplanned expenses which can crop up at any time. During times of cash shortage, payday loans can come to your rescue by virtue of their easy access and availability with no stringent and tedious documentation and therefore, ease your financial burden. For people who are in urgent need of cash in a short span of time such as six months, payday loans are the best way out. Widely popular in the United States and United Kingdom, payday loans are aimed at catering to short term cash requirements of consumers. Consumers need to be aware of how much the loans will cost them. After analyzing the costs, consumers will be able to decide if they can afford payday loans.

    Eligibility criteria

    Payday loans vary widely between different countries and, even between different states in the USA.

    • Any permanent resident of the United States with a salaried income is eligible for payday loans which meet your emergency cash requirements.
    • Consumers should have a permanent bank account in addition to six months of work experience.
    • Consumers need to have a steady monthly income.

    Features of short term finance

    Short term finance is defined as banks offering unsecured loans on a short term basis which has to be repaid at the consumer’s payday. US, UK and Canada among other countries provide instant payday loans in that consumers can receive cash in their account in under thirty minutes following their loan application. With the help of payday loans, consumers can apply for loans for short durations. The loan is offered to the consumer till his pay day, i.e, consumers are expected to pay loans from their monthly remunerations. Payday loans are usually offered for financial requirements that can be repaid from customers’ monthly salary.

    To avail of such loans, consumers should have a permanent bank account in addition to six months of work experience. One of the biggest advantages of payday loans is that they are sanctioned quickly and require less paperwork and documentation compared to other Loan Term Loans. If the eligibility criteria is met, payday loans are sanctioned without much hassles and consumers can see cash in their accounts in no time. Interest for payday loans are higher than other loans. In developed nations such as the US and UK, consumers pay 15 USD for every 100 USD. Consumers can also apply for payday loans online. You have to zero in on the loan provider, following which, you can apply online. An e-application format reaches the bank, following which you may get the sanction. There are several online portals which help you to get the lowest interest rates for your loan through comparative analysis.

    Short term loans and bad credit history

    An individual’s credit history is not the determining factor for banks to provide pay loans in that these loans are ideal for people who do not have a robust credit record. Payday loans differ from long term loans in that the former is offered to consumers regardless of his or her credit record. Banks usually offer payday loans to consumers with a steady income.

    Short term finance in India

    Payday loans are not provided in India. However, informal lending vis-a-vis private money lenders or non-regulated financial lenders do offer cash at high rates of interest on a short term basis. Millions of Indians continue to turn to private money lenders to meet their cash requirements, one of the reasons why India is considered under-banked compared to several developing and developed nations of the world. Nevertheless, banks in the country are increasingly coming up with various schemes and policies for greater penetration and reach. However, financial experts are not too optimistic about the payday loans in India. Payday loans will not find traction in India since there are not too many banks which offer loans to the self-employed fearing lack of stable income and therefore, defaults. In a country where banks are more forthcoming to offer loans to salaried individuals backed by securities, payday loans are not in the horizon in the near future, according to experts. Processing of loans in the country often involves a tedious process in that banks offering short term finance check the consumers’ salary slips, collateral and residence proof among many others which are make it difficult to implement the concept of payday loans in India and instant payday loans at that.

    Finally, many experts rue that high interest rates offered for payday loans will not be suitable for the average Indian salaried individual. There is also a view that people from low income backgrounds or households are the target groups of instant payday loans, which can prove to be detrimental in the Indian scenario in terms of the overall growth of the country.

    Personal loans

    In India, consumers can avail of personal loans which have several advantages such as consumers don’t need a guarantor and can use it for their own personal financial requirements. Banks usually review the income or earnings of individuals before providing the loan. Most banks and financial institutions have a set criteria in terms of age in that for receiving a personal loan, a salaried individual must be aged between 21 and 60 years while for self-employed it is from 25 to 65 years. Most banks offer personal loans ranging from one to five years. IDBI Bank offers personal loans for four years (salaried individuals) and five years (doctors and dentists).

    • Examples

      For instance, IDBI Bank offers personal loans from a minimum of Rs. 50,000 to Rs. 10 lakh. The State Bank of India, offers a minimum loan amount of Rs. 24,000 while HDFC at Rs. 25,000. Personal loans offered by the ICICI range from a minimum of Rs. 20,000 to Rs. 15 lakh. Citibank offers the loans for up to Rs.30,00,000. The amount is credited to the customers’ bank account in 48 hours after approval of the loan. Citibank offers fixed interest rate in addition to the option of part pre-payment. UTI bank offers personal loans for both salaried and self-employed individuals in addition to special loans for chartered accountants, doctors and architects among many others. The loan amount offered by UTI bank ranges from Rs. 50,000 to Rs. 20 lakhs. with a repayment tenure ranging from 12 to 60 months.

    • Benefits

      Some of the benefits of personal loans include a free personal accident insurance cover. Most banks offer personal loans following minimal documentation. What’s more, some banks give savings bank account facility to customers availing personal loans. Personal loans are also provided against existing repayment record of auto or home loans in addition to life insurance policies or receipts of premiums.

      To attract more customers some banks offer additional benefits to those seeking personal loans from them. For example, the HDFC bank personal loan comes with a unique Personal Accident Cover insurance, this ensures that that your family is taken care of, at a nominal premium.The UTI bank also provides a free personal accident insurance cover and it gives zero balance SB account facility to its personal loan customers. The personal loan market in India is growing partly due to more employment and income generation across the country. According to experts, If customers have a robust credit history and track record of timely repayments for the past one year or so, banks will offer personal loans with added benefits at competitive interest rates.

    • Interest rates for personal loans

      The downside to personal loans is that they come with high interest rates from 16% to 22%. Several banks such as Citibank, HDFC Bank, HSBC, ABN Amro, ICICI Bank, Kotak Mahindra Bank and State Bank of India among others offer personal loans. The interest rate for personal loans are either calculated on a monthly basis or annual basis. According to experts, consumers would do well to opt for a monthly reducing rate plan. Several banks offer flexible interest rates. For instance, SBI offers an interest rate of 16% p.a for personal loans. However, if the customer opts for the flexible interest rate, they will have to pay an interest rate of 23% p.a. Some banks join hands with corporates to offer a preferential rate. Also, if customers have a salary account with the bank they are Applying for Personal Loans, they will get lower rates of interest.

    • Repayment tenure

      Customers can repay the loan through Equated Monthly Instalments or EMIs. Customers have to submit post-dated cheques to repay the loan. Customers can also look for banks with have the option of pre-payment or part pre-payment facility. Several banks impose pre-payment penalties as well. For instance, if you (pre) pay over 75% of the principal in 12 months, you will be charged 1% as penalty by UTI bank while ICICI Bank allows repayment after around six months with a penalty. ICICI bank does not allow any part prepayment. Also, HDFC bank allows prepayment after six months and has a penalty rate of 4%.

    • Processing fees

      Customers should also enquire about documentation and processing fees. For instance, SBI charges 1% processing fee while ICICI Bank charges 2% processing fee.

    • Switching facility

      Switching to another bank may not prove to be as difficult you would have imagined provided you are availing of a loan at a high rate of interest. Several banks may be open to take on the loan depending on the rate of interest. For instance, if have opted for a loan with Citibank and considering switching to IDBI,

      if the latter approves your application, they will pay the loan amount to Citibank including the pre-payment fees. You as the customer will then have to repay the loan to IDBI.

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