Long Term Or Short Term Loans: Which should you choose?

  • Updated on: 30 Jun 2023
  • Published on: 20 Nov 2020
Long Term Or Short Term Loans: Which should you choose?

With online personal loan applications, you can receive quick credit with minimal paperwork. The interest rates you get differ depending on various factors like your credit score and the lender. 

Some lenders also provide salaried individuals with personal loans pre-approved up to a certain amount. All such loans, though, can be categorised into short-term personal loans and long-term personal loans. Read on to know how to choose between a long-term and short-term loan online.

Guide to short-term personal loan and long-term personal loan

What is short-term loan?

A short-term personal loan is generally appropriate for small, immediate monetary requirements. Usually, the short-term loan period of repayment is one year or less. Such a loan is usually unsecured and requires no assets to be pledged as collateral. You can get a short-term loan online without much paperwork from any lender like Fibe. 

The interest rate in this case may be lower as the loan tenure is shorter. Loans under this category include credit card loans, instant cash loan, advance salary loans, etc. Digital portals like Fibe provide you with an instant short-term loan without any hassles!

What is long-term loan?

A long-term personal loan has a longer repayment tenure ranging anywhere from 24 months to 7 years. This loan is generally suited for borrowing large amounts and meeting big-ticket expenses. 

The interest rate of a long-term personal loan is generally higher in this case than short-term loans. Loans under this category include large personal loans. If you move away from the personal loan category, you can get long-term secured loans like home loans, car loans and more. 

Short-term loans vs long-term loans: How do they differ?

There are many differences between a short-term personal loan and a long-term personal loan. Your unique requirements will help you determine the type of loan most suitable for your needs. 

You can choose the type of loan you want by using the information in the table below as well as based on your needs, budget and comparison of lenders.

CharacteristicsLong-term LoansShort-term Loans
Repayment durationUnsecured: Over a year and may go up to 7 yearsSecured: Up to 30 yearsFrom 90 – 360 days
Rate of interestInterest rate of these loans is higher since the tenure is longer Interest rates are generally lower because tenures are shorter but this depends on your eligibility as well
DocumentationIf secured, lenders request additional documentation based on the collateralMinimal documentation, based on the lender and at Fibe, there’s zero paperwork
Collateral Collateral is generally required, and, in most cases, you have to submit security documents to the lender Usually, no need for collateral
AccessibilityYou can start the application process online, but offline verification is usually involved so the approval timelines are longer as there are more rigorous documentation checks, especially related to collateralYou can apply for short-term loans easily online; loans are usually dispersed within a few days
EMI AmountThe payment is dispersed over several months, so the EMI amount is lower per monthMay have high EMIs because they have a short repayment period

Which loan should you choose?

The type of loan you choose depends on your need for finance and your monthly expenses and obligations. A short-term personal loan is affordable as the total interest you pay is less compared to a long-term personal loan. However, the monthly payment of such a loan is higher as you have to repay quickly. You can also get an instant short-term loan very quickly online by submitting basic paperwork. 

If your monthly budget is limited, you can opt for a long-term personal loan. Your total interest payment will be higher but your EMIs will be affordable. A long-term loan may also require more documents and take a longer time to apply for. 

So, you can choose a long-term personal loan if you require more funds and a short-term loan if you need a small amount. Remember, for your credit history, a long-term personal loan is better as your loan extends over a long time. Regularly paying your EMIs over a long tenure has a positive effect on credit scores.

Based on these features, you can choose the right type of personal loan for yourself. For a stress-free experience, choose Fibe. You can apply for an instant personal loan with us online in just 2 minutes. Download our instant loan app or register on our website to meet your needs conveniently. 

FAQs on short-term and long-term loans

What are short-term loans and long-term loans examples?

A home loan is an example of a long-term loan. A long-term loan comes with a repayment tenure of up to 30 years. When it comes to personal loans, the longest tenure is usually up to 7 years, but most lenders offer such tenures of 5 years. 

What is the difference between long-term and short-term borrowing?

A long-term loan has a longer repayment tenure and short-term loans are spread over a shorter term. The interest rate depends on your credit score, income and other eligibility terms of the lender. 

Can I get a loan for 10 years?

Yes, you can get a long-term loan for 10 years, provided you meet the eligibility criteria set by the lender.

Can I get a personal loan for 7 years?

While most personal loans have a repayment tenure of up to 5 years, you can get one for a tenure of 7 years too. These are called long-term personal loans.

What is a short-term loan with example?

A short-term loan has a shorter repayment tenure. For example, you can repay a short-term personal loan in just 3 months. 

What are the 3 types of term loans?

These are the 3 types of term loans:

Short-term loans: Can be repaid quickly, in less than 1 year
Intermediate loans: Can be repaid in 1-3 years in general
Long-term loans: Can be repaid in up to 25-30 years

Who is eligible for a long-term loan?

Both salaried and self-employed applicants with good credit scores and sufficient income are eligible for long-term loans. The terms vary from one lender to another. 

What is an example of a long-term loan?

A home loan is an example of a long-term loan. Lenders generally allow you to repay these loans in up to 30 years. 

Which is better: short-term or long-term loans?

The choice between these loans depends on your requirement for the loan amount, monthly earnings, the interest rate offered by the lender and use of funds.

Why are short-term loans better?

Short-term loans can be a better choice as they allow you to meet small-ticket expenses with ease and repay quickly. So, you can be free of your debt burden in no time. 

What is the time period of a short-term loan?

Usually, short-term loans allow you to repay within 1 year. 

Why choose a long-term loan?

You can choose a long-term loan when you want to borrow a substantial amount. A long-term loan also allows you to repay more comfortably, and your instalments are split between more time. 

What is the main difference between short-term & long-term loans?

The main difference between short-term and long-term loans is the repayment tenure. 

Why is a long-term loan better than a short-term loan?

A long-term loan may be more affordable as a longer tenure lowers your EMI burden. However, it can be costly overall, as you end up paying more interest than a short-term loan.


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