Short-term debt, also called current liabilities, is a firm’s financial obligations that are expected to be paid off within a year. Common types of short-term debt include short-term bank loans, accounts payable, wages, lease payments, and income taxes payable.
A short-term loan is a credit facility extended to individuals and entities to finance a shortage of cash. Examples include credit card, bank overdraft, trade credit, payday loans, etc. The loan tenure varies based on the debt type. Many loans mature in 6-12 months while others come with a tenure of 1-2 years.
5 Types of Short-Term Loans in India
- Trade credit is interest-free and is usually extended for 30 days.
- Bridge loans are useful while you're waiting for another loan.
- Demand loans can help when you need urgent financing.
- Personal loans offer a high loan amount and can be used for many purposes.