Short vs Long Term Personal Loans
Personal loans are well known for being flexible. The flexibility in terms of loan amount and repayment makes it one of the most used credit products of the present day. One can opt for any loan amount according to the requirement as well as can pay it off as per the convenience. The loan tenure of a personal loan ranges from 12 months to 60 months. A borrower can opt for any loan tenure within the range.
In terms of the loan tenure, both short- and long-term personal loans come with their own set of benefits. While long-term personal loans help build your credit score and ensure your EMIs are affordable; taking short-term and small personal loans online can fetch you a lower interest rate. Moreover, you will need to pay less in terms of overall interest.
6 points to keep in mind while choosing the right personal loan terms for your needs
1. Short-Term Personal Loans do not require collateral
Short-term loans pose less of a threat to lenders in terms of repayment. As such, your lender may ask you to pledge security to obtain a loan for a lengthy tenure but not for short tenure. The security may take the form of gold, an investment or any other valuable asset.
2. Long-Term Personal Loans help meet important financial commitments
While short-term loans are more suited for emergency situations, long-term loans help you meet your life goals with ease. For instance, you can use a long-term goal to fund your child’s overseas education programme, take care of a medical expense or finance a wedding.
3. Short-term personal loans are more accessible
Today, it is possible to obtain short-term and small personal loans online with a few taps and swipes on your smart phone. Multiple players are offering such services on the Internet. You normally get funding that range up to INR 2 lakh with tenure spanning from 1 day to 3 years. Selecting the right lender is the first step towards finding the perfect match for your financial needs.
4. Long-term personal loans can give you a better interest rate
Lenders evaluate your financial profile before offering loans. Since the status of your finances is not expected to change in the imminent future, you tend to get lower personal loan interest rates on long-term loans.
5. Long-term personal loans help you reduce your EMI amounts
Long tenures help you space out your instalments over a greater number of months, thereby reducing the value of each one individually. You can split up large and small personal loans alike, over many years, and bring down the monthly cost of your loan. Use an EMI calculator to compute your instalments and remember to choose the shortest tenure you can manage. As this ensures you do not pay extra interest in the long run.
6. Short-term personal loans get disbursed more quickly
Lenders normally examine your credit score, monthly income and debt-to-income ratio before approving your loan application. While these terms may be same for both short and long-term personal loans, the fact is that the risk of non-payment is higher for long-term variants. As such, short-term loans are often approved and disbursed quickly.
Difference between Short Term Loan and Long Term Loan
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