What is the Difference Between Short-Term and Long-Term Personal Loans?

Personal loans have become an exemplary choice for financial funding. Today, Banks, several fintech companies, and online instant personal loan apps enable borrowers to secure personal loans swiftly. Good research is required to ensure the best available option meets your needs.

Loans are differentiated into 2 major categories:

Short-Term Personal Loans and Long-Term Personal Loans.

It is necessary to take considerable time and thoroughly learn about these 2 types of personal loans to accompany your repayment capabilities and financial stability.

What is a Short-term Personal Loan?

Short-term loans are small financial fundings with short-term repayment periods. Repayment tenure generally starts from a few months to a year.

What is a Long-term Personal Loan?

Long-term loans are large amounts of financial funding with long repayment periods. Tenure to repay these often extends to several years.

The Key Difference Between Short-Term and Long-Term Personal Loans

A comprehensive distinction between short-term and long-term loans is represented below.

Sr. No.	Criteria	Short-Term Personal Loan	Long Term Personal Loan
1.	Loan Amount	These loans provide smaller funds.	Typically lends large amounts of money.
2.	Interest Rates	Usually, rates for short-term loans are higher due to higher risk engagement.	Due to the low risk involved, long-term loans have lower interest rates
3.	Processing Time	Quick Process	Takes a couple of days to process
4.	Fees and Penalties	These types of loans have higher penalties and fees	Lower penalties as compared to short-term loans
5.	Repayment Periods	Repayment tenure starts from a few months to a year.	With flexible repayment options, a borrower can choose the tenure as per the financial situation and installment amount.
6.	Debt-to-Income Ratio	Demands high monthly installments as it is a short-term loan. To cope with it, your debt-to-income ratio should be low.	Borrowers can choose the repayment tenure and installments as per their financial capabilities and monthly budget planning
7.	Purpose	These loans are suitable for emergency expenses such as debt consolidation, medical expenses, smartphone purchases, or vehicle purchases.	Generally borrowed for large purchases like buying a house, renovating a house, buying a car, or business venture funding.
8.	Collateral	Some short-term unsecured loans do not require any collateral.	Collateral like property, stocks, or gold is required for long-term personal loans.

Both short-term personal loans and long-term personal loans provide a certain set of benefits to the customer. You need to choose a loan type that is preferable to you according to your financial conditions and long-term budget planning. If you are looking to arrange a large amount of funds, you can go for a long-term loan, considering the characteristics listed in this article. While looking for a financial arrangement for small purchases, short-term loans are the best fit as it has short repayment tenure and relieve you from the stress of installments faster.

Lenditt is one of the fastest and safest loan apps in Ontario, Canada. Our tailored loan products have helped thousands of customers get financial support instantly, that too with zero paperwork and not so lengthy application process.

Apply for a Lenditt Loan via its official website or an instant loan app!

Stay tuned for more informative articles!