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What is a Short-Term Loan?

Explore the key benefits of short-term loans from creditt+ — faster approval, lower interest, and easy access even with low credit scores.

8 min read

A short term loan is not just a faster version of traditional borrowing. It is a purpose-built credit tool created for those moments when time is limited and financial decisions must be swift. With repayment windows typically ranging from a few weeks to twelve months, short term loans are designed to resolve immediate monetary requirements without tying you down for years.

The essence of a short term loan lies in its clarity: borrow a small amount, meet a specific need, repay quickly, and move forward. As compared to long-term loans that often come with complex paperwork and extended financial obligations, short term loans focus on solving the present rather than stretching into the future.

Benefits of Short-Term Loan

Short term borrowing isn’t only about getting quick cash—it is about matching money to the moment. These loans are often favoured by borrowers who value time efficiency, minimal formalities, and focused financial impact.

Relief That Matches Your Urgency

Whether it's a medical emergency at midnight, a broken laptop hours before a freelance deadline, or rent due tomorrow, short term personal loans are designed to respond to urgency without hesitation. There is no multi-step approval ladder to climb. You apply, get verified, and receive funds, often on the same day.

A Friend to the Underserved Borrower

Freelancers with variable income, students starting their credit journey, or small shop owners without a deep financial history often struggle with traditional loans. For them, short term loans are not just helpful—they're often the only accessible source of formal credit.

Many NBFCs and digital platforms now offer instant personal loans in a short-term format. Their target? Borrowers who know exactly what they need, how much, and for how long.

Your Credit Score’s Silent Ally

Used wisely, short term loans help build or improve your credit record. Because the loan size is manageable and the repayment period is short, responsible borrowing can add strong, positive entries to your credit history in just a few months.

Characteristics of Short-Term Loans

Short-term loans may look simple on the surface, but their design is deliberate, crafted around speed, simplicity, and repayment discipline.

Short Repayment Horizon

These loans don’t linger. Whether it is three months or nine, the idea is to clear the dues fast. Borrowers are encouraged to resolve their needs and repay without dragging debt into the future

Compact Loan Sizes

You don’t apply for ₹20 lakhs when you only need ₹50,000 for a laptop. Short-term loans usually cover amounts between ₹10,000 to ₹5 lakhs, just enough to meet a need without creating an unnecessary burden.

Flexible Yet Focused Terms

Lenders offering quick loans under the short-term category often provide repayment schedules that can be weekly, fortnightly, or monthly. This allows the borrower to align repayment with their income cycle rather than a standard EMI calendar.

Minimal Paperwork, Digital-First Approach

Multiple in-branch visits are now a thing of the past. Most short term loans now involve a completely digital process, right from application to disbursal, often requiring just bank statements and basic KYC.

Types of Short Term Loans

Short term credit is not a one-size-fits-all solution. It has multiple forms, each tailored to a specific borrowing pattern. Here are some common types:

1. Merchant Cash Advances

Designed for small retailers and businesses, this facility provides upfront cash that is repaid via a percentage of daily credit card sales. Perfect for seasonal cash flow gaps.

2. Line of Credit

This facility allows the borrower to withdraw money as needed, up to a certain limit, and repay only the amount used. Think of it as a reusable credit tank.

3. Payday Loans

Borrow now, repay on your next salary date. These are extremely short-term in nature and typically used for ultra-urgent personal expenses. Due to high interest rates, they should be used cautiously.

4. Installment Loans

Here, the borrowed amount is repaid over a fixed number of scheduled payments. Think of this as a smaller, faster cousin of traditional EMIs.

5. Invoice Financing

For businesses waiting on client payments, this facility allows you to borrow against unpaid invoices, ensuring your operations don’t stall due to delayed receivables.

In emergency-driven situations, be it medical, travel, or unexpected utility dues, many borrowers turn to emergency loans that function within the short-term category, offering a buffer when the budget cracks.

Key Takeaways on Short Term Loans

Short term loans are not about borrowing big; they're about borrowing smart. Designed for quick fixes and urgent gaps, they offer immediate support without long-term baggage. From everyday individuals to lean businesses, they serve those who need speed and simplicity. Their digital-first design and low entry barriers are shifting how India thinks about credit. And when handled responsibly, these compact loans can quietly strengthen your financial footing for the long run.

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