Short term loans vs. Long term loans: a look at the distinction
The demand for loans is at crescendo. Over the years, the demand for loans has been gradually increasing as people find ways in which they can get credit to advance their individual or collective interests. You only need to look around to appreciate the number of institutions or lenders all promising to advance you credit at affordable rates in the UK.
However, if it’s your first time applying for a loan, you might find yourself in a dilemma determining the kind of loan you should go for. The truth of the matter is that there are basically two broad types of loans – short term loans and long term loans. To give you a sneak peek of these two kinds of loans, we are going to discuss them at length so that you make an informed decision when applying for either of them.
Short term loans
As the name indicates, these are the kind of loans that last anywhere between 2 weeks to 12 months maximum. Short term loans are usually advanced to people who need a small amount of money quickly within a short period of time. They have less stringent requirements and are therefore pretty much approved within the shortest time possible. In fact, you can now get access to short term loans online within a couple of hours provided that you have provided all the required details and documents.
Short term loans are not ideal for people who require a huge sum of money as most of the time; a person can only borrow from a minimum of £50 up to a maximum of £1500. Ordinarily, people apply for short term loans to sort out emergency issues and in most cases, one does not need to have a stellar credit score or pledge security to the lender.
Long term loans
Unlike short term loans, these kinds of loans are the one designed for an extended period of time lasting from anywhere between 1 year to 30 years. It’s ideal for individuals who are seeking for loans for investment purposes, to buy a house, a car or any other thing that require a huge amount of money.
While short term loans generally do not require collateral, the same cannot be said about long term loans as lenders require some sort of collateral to cushion themselves should the applicant be unable to pay the loan as agreed. The application process is also strenuous which basically means that one has to wait for a long period before they can be approved. Banks typically offer this kind of loan and having a good credit history is a precursor before a person can be approved for this kind of loan. If you don’t have a good credit history, then having a guarantor is of essence.
In conclusion, depending on your needs you can choose to apply for any of the above two kinds of loans. If you simply need cash for emergency purposes, then going for a short term loan is the idea thing to do. On the other hand, if you want to buy property, a car or machinery, going for a long term loan is the logical thing to do. You however need to carefully read the fine print and terms of loans to avert a situation where you have to deal with hidden charges.