In the past, before the advent of the internet, applying for a loan was an involved process. You had to commute to a lender, wait in a line for hours before you could apply for a loan. Add to that the fact that if you didn’t have specific papers you had to go through the painstaking process again and you will appreciate why the internet has indeed positively impacted every aspect of our lives. The internet has brought convenience, simplicity and seamless applications of loans from wherever a person is. In fact, you can apply for a short term loan online, get approved and get access to the loan cash without moving an inch.
That aside, when we are in need of a loan facility, we have the option to go for a short term loan or a long term loan. The choice we settle for is informed by our needs or aptly put, what we need the loan for. For the purposes of the uninitiated or those considering to apply for a loan for the first time, lets shed light on two types of loans namely long term and short term and what their differences are.
Short term loans
From the sound of the name, this is a loan product designed to be repaid within a short period of time. In essence, a loan that can be repaid within 2 weeks up to 12 months is regarded as a short term loan. This is the kind of loan that you apply for to meet your business current needs, to pay emergency medical fees, school fees, to repair a leaking roof, broken garage door and so on and so forth. The requirements for applying for a short term loan are pretty simple and with the right documentation, you can get access to one within 24 hours. Payday loans are examples of short term loans that have gained popularity owing to the fact that they are secured using a person’s paycheck and issues of credit history do not rear their ugly head.
Long term loans are indeed the opposite of short-term loans in the sense that they have a longer repayment period based on the purpose for which the loan is required. In essence, a long term loan can be repaid for a period of between one and 30 years. People go for long term loans when they need to accomplish a serious project such as building a home, buying business furniture and fittings, modernization of a business and so on and so forth. Unlike a short term loan which you can avail without collateral, a long-term loan requires that you pledge security before you can be considered for the loan.
The security is simply meant to mitigate the risks on the part of the lender should you at some point down the line be unable to meet your loan repayment. When that happens, the lender will simply sell off your security and recoup their money together with interests. Commercial banks are the ones that ordinarily offer long-term loans to customers. Owing to the fact that long-term loans last for a couple of years, processing of these kinds of loans is a bit involved, complex and prolonged. You, therefore, cannot approach a bank today for a long term loan and expect for it to be approved within 24 hours. Additionally, a borrower needs to have an above average credit score to be considered for a long-term loan.
In light of the above, if you are seeking to apply for a loan, I want to believe that the above distinction has been of help in assisting you to make the right decision. Go for a short term loan when you urgently need cash for a short period of time. However, when you want a huge amount of cash to be repaid after a couple of years, a long term loan is your best bet.