Would you like to take out long-term financing or short-term loans? Either way, don’t apply before comparing loans. You may not need a long loan repayment term or vice versa.
The type of amount you need also matters. Do you need a large amount like £40,000 to £50,000? Or do you just need a short term need like a £1000 loan?
This article will help you decide if it is right for you to apply for a long-term loan or to opt for a short-term cash loan. Let’s understand the options and their pros and cons in detail!
Long Term Loan – Definition
A long-term loan is a personal loan you get from banks and other financial institutions. You can also apply for long term loans online. Your credit history must be excellent to obtain these loans. Also, your financial situation should reflect the fact that you can easily repay long-term loans.
The duration of long-term financing can vary from a few years to several years. Typically you can get a loan of up to £50,000 as a long term personal loan.
Long Term Personal Loans – Usage
It is quite clear from the description that the loan repayment term is longer for long term personal loans. Naturally, the amount required is also important.
So if you need to spend on expensive things like buying a fancy car, you might want to apply for a long-term personal loan. The reason is that you can pay for long-term financing in easy installments.
Advantages and disadvantages of long-term loans
The following table contains the disadvantages of taking out a long-term personal loan and its advantages.
|Usually the interest rate is lower considering the longer term of the loan.||The long term of the loan can be counterproductive as you are limited for more time.|
|The amount you can borrow is greater than what is available in a short-term loan.||The overall amount you repay is higher due to the extended term of the debt.|
|You can apply for long
online and offline term loans. There are different providers available.
|You must pay a processing fee.|
|Most credit profiles can get long-term personal loans.|
Short Term Loan – Definition
Almost all banks and various online credit lines offer a short-term loan. These are unsecured personal loans granted for a short period. Since the repayment term of the loan is limited, the loan amount is also lower. You need a strong credit profile to get short term cash loans.
The duration of short-term loans can vary from a few months to a year. Generally, you can get sufficient amount in the form of short-term personal loan.
Short Term Personal Loans – Usage
The duration of the short-term loan is generally a few months. Therefore, the amount borrowed is also not a large sum of money. You can apply for a loan as low as £1,000 if you are ready to repay quickly.
Short-term cash loans are generally taken out to meet a demand for quick cash, such as financing a short vacation.
Advantages and disadvantages of short term loans
The following table contains the disadvantages of taking out a short-term personal loan and its advantages.
|There are many short term loan providers.||A short-term loan amount is less than what you can obtain as a long-term loan amount.|
|You are not bound by the repayment tenure of several years.||Failure to meet the repayment deadline results in further debts and penalties.|
|You can get money quickly.||The interest rates for short term money loans are higher than those for long term finance due to the short duration of the loan.|
|There are various processing fees that increase the overall amount you reimburse.|
The Verdict – Short Term Loan VS Long Term Loan
You may have already assessed the verdict. A long-term personal loan is not for you if you need a limited amount for a few months or a year. Get a short term cash loan for a few months or a year and do your job.
Likewise, it does not make sense to apply for a short-term cash loan in case you need a considerable amount for a longer duration. Only long-term financing with EMIs spread over a long period can meet such requirements.
But never forget to compare loans from different providers. Factor in interest rates, loan term, processing fees, and additional costs to fully calculate your overall repayment amount. Go with a financial institute that offers you a financially feasible deal.