Short vs Long-Term: How to Choose a Loan

Nowadays, more and more people face financial difficulties that can range from the inability to pay their monthly bills on time, to more serious problems. Taking out a loan seems the only viable way to overcome those challenges and get back on track.

However, the world of loans is much bigger and more diverse than the majority of people think. With an array of options right at your fingertips, they often do not know which one is their perfect fit. The length of the loan term is usually the most confusing aspect of the whole plot. Which one is more advantageous: short-term or long-term?

Well, there is no one-size-fits-all solution because a lot depends on your circumstances and needs. However, to opt for the right one for you, you have to understand how the two types of loans are different. Here is how to choose a loan and do not regret it.


Just as their names suggest, long-term loans are intended for longer repay periods while short-term counterparts come with shorter timeframes. But it’s just the tip of the iceberg as there is a bunch of less obvious yet very important differences such as eligibility requirements, loan amounts, and interest rates.

Do not be surprised if your most sought-after options at first glance will turn out the least suitable for your current situation. Generally speaking, long-term loans are less accessible, especially for people who cannot brag about solid financial stability. Due to their secured nature, long-term loans are most often offered through a bank, which means time-consuming application processes and lengthy approval times.

When it comes to short-term loans, they are way past easier to take out. What’s more, you can expect the money within one business day. Experts from GreenStarCash explain that in the majority of cases, the only requirements are that people have a job or source of income that provides them with a minimum of $1000 a month. Of course, it is also necessary to be a U.S. Citizen of at least 18 years old and have a bank account equipped with direct deposit.

The bottom line is if you need money fast, you can’t really count on a long-term loan but when you are not in a hurry, a long-term option makes sense, of course, if you can fulfill all the necessary requirements.

Borrowing Amounts

As a rule, with loans where payback periods last less than a year (that’s what short-term is about), you can borrow up to $1,000. In their turn, the amounts of long-term loans can vary greatly and go up to $50,000 for individuals but, by and large, a lot depends on whether or not you meet the lender’s criteria.

Interest Rates

Quite reasonably, short-term loans come with somewhat higher and less flexible interest rate variants. In fact, this is a kind of compensation for the shorter repayment period and also a way to help prevent borrower default since a lot of short-term borrowers do not boast good credit ratings. On the other side, nothing in this world is that straightforward, hence long-term loans can turn to be more expensive in the long run than they can seem. The more monthly payments you have, the more you’ll end up paying in interest.

Repayment Period

Short-term loans need to be repaid within three to eighteen months, but one year is the most common maximum limit. One does not have to be a math genius to figure out that the higher the loan amount, the longer it will take to repay it. Of course, there are exceptions when people want to pay their loans back in advance. Speaking of long-term loans, they usually take at least 24 months to be paid off, but again, a lot depends on the lender you work with.

Short Term vs Long Term Loans

Simply put, the main advantages of long-term loans are lower monthly repayments that affect your budget less noticeable and lower interest rates. Speaking of disadvantages, here are more complicated and time-consuming application processes and lengthy approval times.

The benefits of short-term loans are much lower overall cost, potentially lower rates, and, of course, the fact that you get your money right at the moment when you need them without the need to wait for ages. The downside is higher monthly repayments that can have a stronger impact on your budget.

Now, when you are well-versed in all the ins and outs of short- and long-term loans, it’s much easier to make the right decision. Just weigh carefully the pros and cons of both types and choose your perfect match.