All of us may need loan at some point of time in our life. Sometimes you can take your loan with careful planning while on certain occasions you may need loan under certain emergency, where you may not have time to do careful planning or thinking. Any loan that you take has to be paid back with interest within certain period of time.
Certain loans that you take with careful planning, you may have to pay them back at smaller instalment and continues for longer period are called long-term loan. Also, there are certain loan, that you may avail in order to meet your urgent need that you may pay back within a year or two are known as short term loan.
Let us try to understand both these types of loans in little more detail and under what kind of circumstances which type of loan is more preferable for your need in the following paragraph.
Usually, long-term loan continues for much extended period so that you can continue to pay in smaller instalments, so that you are not financially overburdened. Following are few loans that come under the category of long-term loan
- Education loan
- Mortgage loan
- Business loan to start business
- Wedding loan
- Home loan
Most of these loans are offered to you by looking at your credit worthiness. Better your credit score, the loans will be available at easier terms and interest rates. It can be both secured as well as unsecured loan. In secure loan, you need to produce some of your asset as collateral. In case of unsecured loans, there is no collateral required however interest rate may be little higher.
You need to shop around and chose for loan which offers you best terms and conditions and also lower rate of interest. Make sure that it is affordable for you.
Short-term loans usually those loans that can run for maximum 3 years period or less. Usually people avail such loans under certain emergency situations only. Following are few types of short-term loans available:
- Pay day loan
This type of loan amount is decided by the monthly salary that you get and is very easy to obtain such loan, if you are working and earning regular monthly salary.
- Online loan
This type of loan is also very easy to obtain and you can apply online and also receive the loan online.
- Doorstep loan
Here, the lender will check your financial status and approve your loan and set the terms accordingly.