Long-term loans and short-term loans differ in several key aspects such as loan amount, loan processing time, interest rates, and loan duration.
Long-term loans are typically used for making significant investments such as buying a home or starting a business. They offer large amounts of money that are repaid over an extended period, usually over years or even decades. Due to the longer loan duration, the interest rates for long-term loans are generally lower than short term loans.
On the other hand, short-term loans are small and are not capable of making long term possessions. They offer a quick fix solution to address urgent financial needs such as paying bills or funding a vacation. The loan amount for short-term loans is much lower than long-term loans, and the loan duration usually ranges from days to months.
Long-term loans undergo strict scrutiny of your documents to ensure your eligibility, increasing the processing time. In contrast, loan approval for short-term loans is quite instantaneous, and the eligibility criteria are more relaxed. However, short-term loans tend to have higher interest rates compared to long-term loans.
Long-term loans typically involve regular EMI payments, which instill better financial discipline and help you achieve financial independence in the long run. Short-term loans, on the other hand, are paid in one lump sum amount.
In summary, long-term loans are more suitable for making significant investments and offer lower interest rates, while short-term loans offer quick and affordable financial support for urgent needs. The choice between the two depends on the borrower’s financial needs and circumstances.
