Whether to take a short term loan or a long term largely depends on the requirements and the repayment capability of the applicants. Both these loans offer the money required to meet the needs of the individuals but each one of them has its own characteristics and features which need to be looked at before getting to a final decision. Knowing the difference can help one take better and informed decisions which can have long term impact on ones finances.
Long term loans- Take a deeper look
The long term loans are meant for a long tenure which often extends up to 15-30 years. They are required to be paid back in the form of small monthly equated installments much to the liking of the individuals. These are generally provided by the banks, financial institutions of repute. The lenders run a complete background check of the individuals and ascertain their eligibility on the basis of a number of factors including the credit rating and the history being the prominent ones. The processing of these loans takes a much long time and the reasons are quiet obvious- the amount of risk involved and the high value of the loans.
Some of the long term loans include mortgage, automobile and the student loans. Since these loans are designed to offer large sums of money their tenure is generally kept long so as to keep the monthly repayment low and enable customers repay them comfortably. Normally with such high amounts, lenders generally keep assets as pledge against the loans known by the term collateral. Those with better credit ratings can expect lower interest rates, although credit rating is not the sole criteria for these loans.
One of the drawbacks of the long term loans is that the processing of the loan takes a very long time often extending up to a month. There is a huge amount of documentation and verification of the same involved and all of this takes a lot of time. However, anyone looking for the purchase of a house or a car, the long term loans are the obvious choice.
Short term loans – Meant for specific needs
Although there are different kinds of short term loans, the ones which are the most common are the payday loans. These loans are also known as the fast cash no credit check loans. The approval is very simple and one can have them at a short notice of just 24 hours. These are designed for people who are in immediate need of cash in small amounts but do not have the credit ratings or the documents and most importantly time to get this loan from the traditional banks. The lending criteria of banks requires the applicant to have a good credit score, stable job, good income, high value assets, which makes it difficult to qualify them.
One of the distinctive features of the short term loans is the high interest rates that they carry. This is mainly on account of the higher risk associated with these loans. No credit checks on the applicants keep the lender under suspicion of the borrower’s financial credibility. Hence these loans are simply offered on the basis of the employment and the income details of the individuals.
Knowing the features of both the long terms and the short term thenetlend loans it should be a lot easier for you to decide amongst the two. If you have the capacity to repay the loans fast and require a low amount, the short term loans will work in your favor. However, if you are in need of high value loans are interested in lower monthly installments and have a stable job which can allow you pay over a long time; long term loans are best suited to you.