Are Long Term or Short Term Loan Periods Better?

Loan periods

There are many situations or opportunities in life that can find you with less cash in your account than you need to address them. Your child has been accepted into a prestigious college to pursue their dream course. Or you’ve got a great new job which is next to impossible to commute to using public means, necessitating the purchase of a car and you need to consider a loan and loan periods.

These are just a few examples of scenarios that will likely call for more money than you have at hand. Even if you have the required amount in your savings, you may not want to empty your piggy bank for just that one item. A personal loan will help you meet the need or seize the opportunity in a timely way.

But loans come packaged in a variety of products from the various lenders who offer them. Among the key considerations you need to make is the tenure of the loan.

Will a short-term or long-term loan work better for you? Each of these loan types has its pros and cons, which you need to weigh carefully before you make a decision.

Short Term Loan Periods


One of the factors that make short-term loans so attractive is how quickly they can be accessed. If you’re applying for one from one of the online lenders through a mobile app, you could get the cash sent to your bank account or mobile wallet in a matter of minutes. And you won’t have to look hard to find an installment loan online.

You don’t have to jump through as many hoops to get a short-term facility as you do to get a mortgage or a long-term personal loan. Many online lenders, such as FastLoan UK, won’t need you to have a great credit score to lend you cash. You also won’t have to endure a weeks-long back-and-forth with tons of paperwork involved.

The term short-term loan is derived from the fact that these loans have a short repayment period- usually less than a year. For payday loans, for instance, you will be required to pay back a lump sum when you get your next paycheck. The fact that the repayments are not stretched out over years means you stand to pay less in terms of interest. It also means that you get out of debt faster.


Much as you won’t accumulate a high interest rate from the tenure of the loan, short-term loans usually come with a high amount of interest if you prorate it over a year.

Short-term loans ordinarily involve small amounts. Depending on how much you earn, you won’t get more than a couple hundred dollars as a payday loan.

Long Term Loan Periods


A long-term loan will typically give you the leeway to make repayments over a number of years in installments that you can comfortably fit within your budget. Short-term loans normally come with a constrained repayment window. Many short-term borrowers unable to meet the stringent repayment terms have fouled up their credit history as a result.

Before a lender can allow you to pay them back over 20-25 years, they have to assure themselves that you’re a low-risk prospect. For this reason, they will look into your banking history, credit scores and job security among other factors. Loans given to lower-risk borrowers will not only be more flexible in terms of the repayment period but also generally have a lower interest rate.

And because they are offered to people generally considered low-risk, long-term loans usually involve higher amounts. If you’re looking to finance a big business venture or buy a huge asset, you will need such a loan. With a long-term loan, you can borrow thousands, even millions, of dollars.

With the more relaxed repayment conditions and the larger amount you can borrow, a long-term loan can be the thing you need to deal with your other debts.


When you go to your local bank for a mortgage or any other kind of long-term loan, it will ordinarily be the beginning of a long back-and-forth. You will be required to fill and sign a number of forms and present a number of documents in a process that could take weeks to complete.

Besides the arduous process, you can look forward to footing an assortment of administrative fees in addition to the loan interest. Speaking of interest, the rate of interest you agreed on with the lender may change with some types of long-term loans. So be sure to read the fine print of your offer letter before your sign.

It Boils Down To You

Whether a long-term or short-term loan will work for you will depend on your circumstances.

How much money do you need? Will you be able to work within the limits of short-term loans? How is your credit score?

As you ask yourself these questions it will become clear which option is best.

Loan periods article and permission to publish here provided by Rebecca Stuart. Originally written for Supply Chain Game Changer and published on December 10, 2021.