Well, Bank loans or any loans nowadays are straightforward to take. Everything is just a website away. All you have to do is search for the perfect site and apply for the loan. But the real thing arrives in choosing the type of loan. There are different types of loans; there are the car-loans, the home loans, and what more, based on the term of the agreement, the short-term and long-term nature.It is effortless to decide the type of loan when it comes to things such as a home or car. But well, what about the duration of the loan. Do you ever think about this? Are you good at what you are opting for? Is the scheme you are opting for right for you? Worry not, we are here to answer all your loan term agreement related queries. You have to do one thing. Stay with us.
What are Long-Term and Short-Term Loans?
These types of loans refer to the duration of the period in which the loan amount is being paid back.
Loans having a short period of the agreement and are generally less in amount are considered as short term loans. Loans such as car-loans or peer to peer lending fall under this category. They can last from a few months to a year.
While loans having a long period of the agreement and have massive dealing amounts are considered as Long-term loans. Loans such as home loans or other big loans fall under this category. These types of loans can last from a year to several years (10 to 15 years).
Some loans can be short-termed or can be long-termed, while some can be somewhere in between these loans. Such as car loans. The loan can be a short term, a long term depending upon the time and the amount of agreement.
How are Both Types Different?
The two-basic point of difference between both types of loans is the duration of the agreement and the amount of settlement. As mentioned earlier, long term loans are for longer durations and massive loan amounts, while the short-term loans are for shorter durations and relatively fewer loan amounts.
Another [point of difference is the approval process. For a common man, getting approval for a short-termed loan will be relatively easy. In such types of loan amounts, the lender will do a quick check of your background, such as your creditworthiness and all while not going into much detail. You can even get a quick loan without the checking of your creditworthiness, such as in Secured or Collateral Loans, where you can get a loan by keeping something you own as a Collateral. And so, these loans can be approved on the spot, and you can get your money instantly.
Whereas, getting approval for a long-term loan is a process full of hassles. You will not get easy support for a long-term loan. But in Viva Payday Loans, you will get a hassle-free process of borrowing both long term and short term loans through a panel of lenders. However, with other sites, you will have to prove your creditworthiness to the officials adequately. They will do a thorough check-up on your background. And in some cases, if you are taking a loan from the bank, the bank even collects your copy of the registration of your estate. Even the loan amount takes time to proceed. And only after the full processing of the loan, you will be able to get the loan amount.
Lastly, short-term loans are known to have higher and flexible interest rates options. This is to compensate for the shorter duration of the loan agreement, while long-term loans are known to have lesser interest rates.
How are they Similar?
The very fundamental similarity between the two is that all the lenders must abide by the State and federal loan requirements and must obtain proper licensing and certification. Regardless of how long the duration of the agreement is, the borrower will always have the option of paying the amount back in a lump sum or either in periodic payments. Most borrowers choose to pay in regular time intervals to have management over their other finances.
The last point of similarity is that all and any loan is susceptible to legal issues such as loan frauds and criminal violations. These types of problems will require legal action to solve.
So, as the English proverb says, “The work suits in the hands of the one skilled to do it,” the same is the case with things and processes too. For having a loan, including home terms, you will need to go for a long-term loan, while if you need some quick cash, you can opt for the short-term. But as mentioned earlier, all the processes can sometimes lead to legal issues, and so, you must check and verify carefully before taking any step.