Short Term Loans Vs Long Term Loans

There is a huge demand these days for cash loans because of the fact that there are sometimes problems that have to be solved with the help of money coming from other sources. While there are so many types of loans that are available for those that are interested, two main categories stand out:

  1. Long term loans
  2. Short term loans

Differentiating between these will help you to quickly realize what you should opt for. With this in mind, let us consider the following so you can make the best possible choice.

Short term loand vs long term loans

Short Term Loans

In most cases the short term loans are much easier to obtain then the long term loans. This is a loan type that will have a repayment period of up to 1 year, with the minimum usually being 1 month or until the next pay check.

The main difference between the short term loan and the long term loan is that the maximum amount that is usually offered for the short term option is of up to £1,000.

The main reason why you would opt for a short term loan is a financial emergency that appears. We can mention the payday loan as the best example of a short term loan. In this case, the lender will offer an advance amount of money, the borrower receives the cash really fast and repayment has to be done when the salary is received.

Conclusion : When your business doesn’t qualify for a line of credit from a bank, you might still have success in obtaining money in the form of a one-time, short-term loan which is less than an year ,  to finance your temporary working capital needs. If you’ve established a good banking relationship with a banker, he or she might be willing to provide a short-term note for one order or for a seasonal inventory and/or accounts receivable buildup.

Long Term Loans

The long term loans are basically those that are taken out for a repayment duration of 1 to 30 years, based on the purposes of the borrower. Many business owners, property buyers and car buyers will take advantage of these loans and see them as beneficial. You will usually go to the bank when you want a long term loan and there is a need to have collateral in order to be approved for a larger payment.

Conclusion :  A form of debt that is paid off over an extended time frame that exceeds one year in duration. Obtaining a long term loan provides a business with working capital that it can use to purchase assets, inventory or equipment which can then be used to create additional income for the business.

In the event that you need a large amount of money for a big expense, you will most likely have to consider the long term loan since the alternatives would automatically bring in lower financial opportunities.

Keep in mind that because of the really long repayment term, the applicant needs to offer different documents as references for payment capability proof and personal identification. The borrower always needs good credit score and history or a person that stands in as guarantor.

So above points explain in depth between Short term loans  and Long term loans . So based on your requirements  you opt the respective best option .

I am Finance Content Writer. I write Personal Finance, banking, investment, and insurance related content for top clients including Kotak Mahindra Bank, Edelweiss, ICICI BANK and IDFC FIRST Bank.