What are the differences between a long term loan and a short term loan?
What is a Short Term Loan?
Loans requested up to 12 months are short-term loans. Short-term loans in consumer loans are more advantageous than long-term loans in terms of interest rates. If you have the capacity to pay the installments of the loan with a term of up to 12 months according to your income, it will be to your advantage to take the loans in short term.
What is Medium and Long Term Loan?
Medium-term loans are defined as loans with a term of 12 - 60 months, while long-term loans are generally defined as loans of 5 years or more. Long-term loans mostly cover large amounts of loans such as housing, vehicle or renovation. If the amount to be withdrawn is high, a long term loan application should be made due to the campaigns offered by the banks.
Long Term Loan, More Advantageous or Short Term Loan?
As the competition in the financial sector increases, banks that give loans are increasing their loan types day by day and trying to address every need in order to attract more customers. As a result, many different payment plans and loan types with interest rates emerge, from consumer loans to housing loans and vehicle loans. At the same time, loan types classified as short-term, medium-term or long-term have certain advantages and disadvantages depending on customer expectations.
For example; While interest rates are generally lower in long-term loans such as housing loans, interest rates increase as the loan term decreases in loans such as consumer loans. Since maturity and interest differences affect the total amount to be paid and the duration, it is necessary to make a decision by considering all the details before taking a loan. If you want to pay a total amount that is not more than the loan you will withdraw, you can choose short-term loans. However, if the monthly amount in short-term loans exceeds your budget, you can evaluate long-term loans.
Another main difference between long-term and short-term loans is the monthly payment amount. You can turn to short-term loans so that your debt ends earlier, but the installment amount of short-term loans should not be at a level that will strain your monthly income. Otherwise, you may be faced with a financially challenging payment process.
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