Loans offered to a person for a short time usually ranging from 15 days to one-year are called short-term loans. In general, these loans are unsecured and beneficial to people who need finances for a short period.
LoanPig helps borrowers find short-term loan lenders effortless and quickly. They welcome all customers even with bad credit history. They have a vast lenders panel, so their acceptance rates are high. You can learn more about LoanPig on their about us webpage. The different short-term loan types you need to know are –
- Merchant cash advances
- Lines of credit
- Payday loans
- Installment loans
- Invoice financing
In general, short-term finance is a lifesaver as you can gain easy access.
Long term loans are for long tenure ranging from over a year to 30 years and more. The borrower has to offer collateral as security to the lender. There is also a need for monthly income proof and job stability to be given. The common long-term loan types are bonds, mortgages, and government debt.
Short-term versus long-term loans
The key difference between both loan types is the repayment time plus interest. There are other variables like borrowing amount, process timing, and cost involved.
In general, long-term loans are of a large amount than the short-term ones. Therefore, the interest will be calculated according to the borrowing amount. Even the installments and included interest amounts are much higher than the short-term.
In the short-term option, you cannot borrow an amount that is less than $1,000. If your need is to borrow a minimal $25,000 then the financial lender [bank] will make arrangements to ensure it is paid across in a few years, especially if the borrower is eligible.
It will depend on loan option and affordability
Loans that you repay for years
- Repaid each month
- Small APR rates
- The repayment amount is large as borrowing funds are large
Loans that you repay in several weeks
- Repayments are weekly
- The repayment amount is small as borrowed cash is small
- APR rates are large
If you chose payday loans then the repayment of the debt has to be completed as soon as you get your next salary. The APR rates are high. The principle and the interest have to be paid in a lump sum, so your repayment amount will be high than short-term and long-term loan options.
The interest rate is the cost of borrowing. On shorter loans, the interest rate is high. APR means annual percentage rate. APR will help you compare different loan rates. When you use APR to compare, short term loans look less favorable. Remember, short-term loans get repaid in a year, while APR calculates yearly rates. For long-term borrowing, there is the collateral used as security. Therefore, the interest rates are lower.
The processing fees differ from one product to another in both kinds. If you need a repayment extension past the repayment date, then there are extra charges. If you want to repay the loan fully in advance or before the expiry date there will possibly be charges. Check such hidden costs before you indulge in borrowing any kind of loans.