When running a business, financial needs can pop up at any moment. It can be a supplier payment, restocking, purchasing new machinery, and so on. Here, in such a situation, having the availability of instant funds can be really helpful. These loans are financial resources and are popularly known as flexible or flexi loans. They offer a convenient and easy way to manage short-term expenses without the constraints of traditional loans. Now, let us learn about what a flexi loan is and how it benefits entrepreneurs.
What is a Flexi Loan?
A flexi loan is a financial product that provides borrowers with a pre-approved credit limit and empowers them to withdraw funds as per their requirements. These loans basically act as revolving credit facilities. It means the borrowers are allowed to re-borrow after repaying the initially borrowed amount within the specified time period.
Due to this, flexi loans come out as the best possible solution for those uncertain financial situations. Let us continue our journey by understanding the importance of managing short-term expenses. It will help us gain some clarity on why a flexi loan is important.
Importance of Managing Short-Term Expenses
Did you know that effectively managing short-term expenses can enable people to attain financial stability? Well, it helps avoid unnecessary stress and allows entrepreneurs to stay focused on their long-term financial goals. Flexi loans are specially made available to help entrepreneurs address their specific business needs.
How Does it Differ from Traditional Loans?
Regular loans usually give a big chunk of money all at once. However, the catch is, as an entrepreneur, you have to pay it back in fixed amounts on specific dates. On the contrary, flexi loans are more adaptable, and you can take out money whenever a requirement occurs. Moreover, another significant benefit is that the interest has to be paid only on the money you actually use. So, it’s like having a safety net for your finances besides also giving you more control and convenience.
Types of Flexi Loans
Here are a few different types of flexi loans that you can avail of:
- Line of Credit
A line of credit is a popular form of flexible loan that provides borrowers with a predefined credit limit. They can withdraw any amount up to this limit, making it an ideal solution for various short-term expenses while running a business.
- Overdraft Facility
An overdraft facility is linked to a savings or current account. It allows individuals to withdraw more money than what is available. As a result, this loan provides an additional cushion during financial emergencies.
- Credit Card Line of Credit
Credit cards also offer a form of flexi loan. It enables users to make purchases up to a predetermined limit. They can repay the outstanding amount in full or in part, with interest charged on the remaining balance.
Now that you know about the different types of flexi loans available, let’s look at their advantages.
Advantages of Opting for a Flexi Loan
- Flexible Repayment
These loans offer a flexible system of repayment for the borrowed amount. It means entrepreneurs can repay at their convenience as long as it falls within the specified tenure. As a result, this relieves borrowers from the pressure of monthly instalments.
- No Fixed EMI Burden
Unlike traditional loans with fixed EMIs, flexible loans offer relief from a predetermined monthly payment. As per the guidelines of these loans, borrowers can enjoy the freedom to repay in accordance with their financial situation.
- Pay Interest Only on Utilised Amount
Another significant advantage of flexi loans is that interest is charged only on the amount utilised. This means borrowers can save on interest costs if they don’t use the entire approved limit.
- Cost-Efficiency in Comparison to Regular Loans
With interest being charged only on the utilised amount, flexi loans can be more cost-effective than traditional loans.
- Quick Access to Funds
Flexi or flexible loans provide swift access to funds, ensuring that urgent financial needs are addressed promptly. This can be a game-changer in situations where time is of the essence.
- Addressing Urgent Financial Needs
Whether it’s an operational emergency, a machinery purchase, or a supplier repayment, flexible loans offer a lifeline for immediate financial requirements.
Considerations Before Opting for a Flexi Loan
Although flexible loans are widely adopted, there are certain things to remember when opting for one. Here are a few considerations that you can make note of as a budding entrepreneur:
- Eligibility Criteria
One of the most important factors to be mindful of is the eligibility criteria. The regulations differ as per the lending institution, but the base remains the same. The eligibility criteria may include the following factors:
- Employment status
- Creditworthiness, etc.
- Credit Score Requirements
A good credit score significantly enhances the chances of approval for a flexi loan. Lenders use this score to assess the borrower’s creditworthiness and determine the terms of the loan.
- Income and Employment Stability
Stable income and employment have an important role to play in the approval process. Lenders prefer borrowers who have a consistent source of income to ensure timely repayments.
- Interest Rates and Charges
It is essential to compare interest rates and charges offered by different lenders. This helps ensure that the flexi loan remains a cost-effective solution for short-term financial needs.
- Repayment Terms and Penalties
Understanding the repayment terms is important to avoid any surprises down the line. It is necessary to know everything, such as the tenure, associated penalties for delayed repayment, etc.
Flexi Loan: The Ultimate Solution to Financial Emergencies
Flexi loans provide a valuable financial tool for managing short-term expenses efficiently. They offer flexibility, cost-efficiency, quick access to funds, and cater to the dynamic financial needs of businesses. Well, besides businesses, flexible loans have several benefits, which can be leveraged even for personal use.
So, should you consider a flexi loan for your short-term expenses? The answer lies in understanding your financial situation and the specific needs that such loans can address. Make wise decisions, and take the assistance of online lenders like KreditBee to manage your finances with this smart financial solution.