An economic need has arisen and you have decided to approach it by asking for an online credit but then the question arises about what you are most interested in: a short-term loan or a long-term loan. On this post, we explain what exactly each one consists of and we have studied both the advantages and disadvantages of a short and long term loan so that you can decide with discretion which of the two products is more interesting for you.
Short and long-term loan: how are they different?
A short-term loan is a type of loan that must be repaid within a maximum period of one year. For its part, a long-term loan is one that has a maturity of more than one year, that is, it can be repaid in installments whose payment period exceeds twelve months.
Advantages of a short-term loan
A short-term loan allows us to obtain money immediately. Today, we can apply for our short-term credit through the Internet and get a quick response, which makes us receive the money in our bank account in just a few minutes.
It does not demand paperwork. In general, we only need to have our ID, an account number in which to receive the deposit, and our contact information. We will not have to break our heads looking for papers and documentation, nor will we need to visit any office to deliver them and formalize our short-term loan, which simplifies -and much- the application process.
Disadvantages of a short-term loan
The amount of the loan is usually not very high. In general, we talk about credits that do not exceed 800 or 1,000 dollars. They oblige to collect the borrowed money in a short period of time, which is not plausible for all the clients that consider applying for a loan to cover a need. They can not be postponed. The short term loans must be returned in the stipulated period of time.
Advantages of a long-term loan
By offering the option to return it over a long period of time, it allows you to choose the number of installments with which we will feel more comfortable paying. Long-term loans are better adapted to each user’s solvency capacity. In many cases, contracts for long-term loans can be modified or renegotiated.
Disadvantages of a long-term loan
The interests of a long-term loan are usually higher than those of short-term loans. Long-term loans usually require payrolls, guarantees or documents that prove the client’s creditworthiness. Another issue to consider is the entity to which the loan is requested. Banking entities usually involve longer processes to process the loan. However, today there is the possibility of ordering online. The providers of online loans offer different conditions to those of traditional banks, without having to provide documentation such as payrolls or guarantees that justify the solvency of the client.
Short and long-term loans: which option is best for you? You can decide it by yourself!