Winning Bizness Desk

Mumbai. When needed, almost every person has to take a loan sometime or the other to meet his financial needs. In case of sudden need of money, short term loan seems to be the easiest way to collect money and realizing this, almost all banks provide loans for short term. This loan, which is easily available without any hassle, is as easy as it is to take, but it makes you to sweat as much in repaying it. That's why whenever you have to take a short term loan in an emergency, take it very carefully. Loans for personal loan, loan taken on credit card, overdraft and bridge loan etc. come under the category of short term loan. It is an unsecured loan and the repayment tenure ranges from six months to one year. This loan gets approved instantly. For this it is also called 'two minute loan'. There are many risks with this loan as well. Today we will tell you about them only.

High interest & hefty penalty

Short term loans are offered by banks at a higher rate of interest as compared to other loans. This is the reason that the chances of defaulting by the person taking this loan are also high. Short term loan without knowing the interest is very risky. If you do not pay the short term loan installments on time, then the bank imposes a lot of penalty. Due to this, more problems start to arise in repaying it. In such a situation, it is important that you read its terms and conditions carefully before applying for the loan. Also see if you have the option of prepaying the loan.

And higher EMI

The tenure of short term loan is less. Therefore, to repay it, more EMI has to be paid every month. Hefty EMI usually spoils the budget of many people. Due to this people default the loan and they have to pay a penalty. This increases the debt burden on them.