What is a short-term loan? What to pay attention to when taking a short-term loan?

Currently, banks and financial service companies offer many different types of loans to suit the needs of customers. In which the form of short-term loans is very much interested. So let What is a short-term loan?? What are the conditions for short-term loans at banks?

Let's explore the information about this type of loan in the article below.

What is a Short Term Loan?

Short-term loan is a form of lending from banks and financial institutions whose term from borrowing to repayment is less than 12 months. This is a much shorter term than medium and long term loan services.

Registered customers monthly installment loan at the units are always responsible for paying both principal and interest to the lender periodically. Normally, customers make short-term loan applications to supplement business capital or use for personal consumption purposes.

Short-term loans are often used for the purpose of meeting business or agricultural production needs for individuals or small and medium-sized businesses that are experiencing a temporary shortage of working capital. In addition, short-term loans also help solve personal financial problems for customers who need money quickly and can pay in a short time.

How Long Is Short Term Loan?

The bank will give the customer an amount as agreed in the loan contract. The borrower is responsible for paying the principal and interest in full within the specified time period. Short-term loans are contracts with a term of less than 12 months

Often used to offset capital in business or for personal consumption.

Features of Short-Term Loans

Short-term loans have many advantages to attract customers, but there are also some ominous disadvantages.

Outstanding advantages of short-term loans

Loan documents are simple, processed quickly and borrowers will quickly receive loans to solve their personal spending needs or business capital shortages in their units.

Thanks to short-term loans, businesses can overcome financial difficulties at the moment to create opportunities for stronger development.

The fast loan limit at banks is very high, up to 500 million for business units and up to 200 million for individual customers who need to borrow for living purposes.

The loan term is also very flexible from 1 to 12 months, depending on the borrower's choice and loan terms unsecured loan of the financial bank or the bank chosen by the borrower.

When you choose to use loans at big banks or large financial companies, there will be very little risk of solvency as well as term conversion problems.

Motivate individuals or businesses with peace of mind to increase investment activities and work to be able to repay loans as soon as possible.

Loan types are very diverse, customers can borrow VND, USD or other foreign currencies as permitted by law.

Disadvantages of short-term loans

Typically, interest rates on short-term loans will often be higher than medium-term or long-term loans that have a loan term spanning many years. At the same time, if you cannot balance your finances to pay on time, you will be fined and easily fall into bad debt.

For short-term loans, most banks now often charge a high fee for early repayment. Customers need to note this term before deciding to take a short-term loan.

The Role of Short-Term Loans

For economy

Commercial banks are an important factor for investment because of their outstanding characteristics when borrowing short-term such as: low risk, average interest rate, term conversion. Unlike financial companies and securities companies, they mainly provide medium and long-term loans, while commercial banks provide short-term capital for the economy.

For Businesses

The form of short-term loans is a timely supplementary source of finance for businesses, meeting the short-term capital needs of enterprises, helping to solve temporary difficulties. This is also a cost-saving solution for businesses, creating conditions for businesses to catch up with business opportunities and take advantage of opportunities for production development.

Besides, thanks to this short-term loan, it will create a driving force, a factor to stimulate production and business of enterprises. The conditions in short-term loans put pressure on enterprises to do business effectively.

For the existence and development of commercial banks

Short-term lending activities are the basic and main activities of commercial banks.

Short-term lending activities are the main source of income for the Bank.

What is the Short Term Loan Interest Rate?

According to information from the State Bank, banking activities for the week of July 20-24, 2020: “The VND lending interest rate at state-owned and commercial banks fluctuates at 6-9%/year for short-term loans. In addition, in some industries and fields, the maximum short-term lending interest rate in VND is 5.0%/year. For USD loans, short-term lending interest rates are common at 3 - 4.5%/year and medium and long-term lending rates will be at 4.2-6.0%/year.

If you borrow with a small amount, you will have to pay a higher interest rate than if you borrow a large amount. High interest rates help banks offset fixed operating costs to service loans.

Conditions for Short-Term Loans at the Bank

Not everyone can get short-term loans at banks, however, in order to increase the number of customers coming to use short-term lending services at their units, banks, or financial institutions usually do not set too many requirements too difficult for customers.

Conditions for quick money loans at banks

Borrowers only need to meet the following conditions to be able to quickly apply and borrow money as follows:

Customers are citizens of Vietnam, are 18 years of age or older and have full capacity to be responsible for civil acts.

Have a legal permanent residence in the area of the bank branch for which you want to borrow money.

Have a valid National Identity Card or National Identity Card.

Have financial ability and prove monthly income will be able to pay the debt.

Having legal collateral such as real estate papers, car papers, pension tables, etc.

Prove that the loan purpose is correct with the loan product.

Have a realistic and feasible capital use plan to be able to repay the loan to the lender as soon as possible.

Have a good credit history and no bad debt.

In addition, the borrower may also have to provide some necessary documents as requested by the bank.

Short-term loan documents

Dossier of application for a loan;

Loan agreement;

Report on the financial status submitted by the customer to the credit institution during the loan period;

Documents related to loan security;

Loan decision signed by an authorized person; in case of collective decision, there must be a record clearly stating the passed decision;

The documents arising in the process of using the loan related to the loan agreement are guided by the credit institution.

The Most Popular Types of Short-Term Loans Today

In order to give customers more choices, banks have now launched many forms of service for customers unsecured loan difference. Among them, there are the most popular forms of short-term loans.

Form of loan by installment

When a customer borrows money for a certain purpose and wants to borrow money from time to time, each time the bank borrows money, the bank must carry out lending procedures and the two parties sign a loan agreement. according to regulations of the Law.

Working capital loan according to the limit

With the form of mobile loan according to the limit, the bank or financial unit will lend the borrower a certain limit when the customer registers to make a loan application. You can only borrow up to the limit specified by the bank and not exceed it. Every time a customer needs to borrow a loan, they need to complete the procedures and sign an agreement with the bank, if normally, the customer can make a loan once a year.

Form of loan syndication

For business people who need investment money, they often use the form of loan syndication. This is a form of loan that is obtained from two or more credit institutions that lend to a customer subject to carry out the borrower's business projects.

Rollover loan

Revolving loan is a form of short-term loan of money. When applying for a loan, the customer will be provided with a short-term credit limit by the bank upon request and have the right to withdraw capital according to the terms of each debt acceptance agreement, within the scope and term of the limit.

At the end of the term, the customer can make full payment or extend the loan period provided that the customer must meet the requirements of the lender in accordance with the provisions of the law.

Form of service loan

The form of seasonal loan is a type of loan that credit institutions will make loans to customers who need capital to grow and take care of seasonal crops and livestock. by the contiguous production cycle.

Form of loan according to overdraft limit

When taking out an overdraft loan, the bank will grant the customer a usage limit. Customers can make payments in excess of the amount available on the card. however, this amount will not be more than 5 times your salary. Objects for banks to provide overdraft loans are customers who have a cycle of business activities within 1 month.

Revolving loan form

With this form of loan, customers can use the principal balance of the previous cycle until the operation of the next business cycle. However, you should note that the loan term cannot exceed 3 months. The loan condition for revolving loan is that customers borrow capital for business activities will not exceed 1 month.

Online hot loan form

With the development of technology, the form borrow money online It is a very convenient and fast form of short-term loan. Customers can receive money the same day with simple procedures nad no need to prepare cumbersome documents or proof of income. Customers can easily borrow money online through websites or mobile applications of financial institutions. However, the online loan limit is usually quite low and the interest rate is also high.

Learn how to get out of debt piled up should know

Some Prestigious Short-Term Loan Banks

According to a survey of loan interest rates as well as the bank's reputation, here are some of the best short-term banks today:

VIB short-term loans: In order to meet the maximum short-term capital needs of customers, VIB has deployed a package of VND 1,000 billion for short-term loans with preferential interest rates from 8.49%/year.

Vietcombank short-term loan: Small and medium-sized business customers who need a loan with a term from 1 month to 3 months will enjoy the lowest interest rate of 5.5%/year. For terms from more than 3 months to 6 months, the preferential interest rate is 5.9%/year.

BIDV's short-term loan: Apply an interest rate ceiling of 6.5%/year for short-term loans in VND to priority subjects according to regulations of the State Bank.

Short-term loans from Vietinbank: VietinBank supports customers with short-term loan needs through the implementation of the Program "Optimizing efficiency with USD capital", with a minimum preferential interest rate of only 1.5%/year (instructions on unsecured loans Vietinbank lowest interest rate)

Conclusion

Through this article, you must have understood what a short-term loan is and the problems related to this form of loan. If you need advice, use quick loan forms, please contact us for the fastest service.

Information edited by: banktop.vn