We agree that the need for credit can arise any time. It could be for reasons such as layoffs from employment, medical emergencies, need to travel or to buy expensive gadgets such as Televisions, Mobiles, etc. The reasons can be endless. Similarly, the duration for which the loan is required can also be varied.

If there is one loan which can cater to any reason like we mentioned above, it is definitely the personal loan. This loan is easy to avail and comes at less documentation than secured loans like home loans or vehicle loans. One feature that stands out here is that personal loans are not linked to end use of the loans, i.e. these loans can be put to any use as decided by the individual.

When it comes to personal loans, they can range to anywhere from a few days to a month to a year and more. Going by the definition, long-term loans are those whose tenures extend beyond 1 year.

Long-Term and Short-Term Personal Loans

Tradition bankers and other NBFCs generally grant long-term personal loans ranging between 1-5 years. On the other hand, new age fintech lenders look at short periods of lending which can be as short as a few days or a few months. Among the traditional lenders also, there may be variations of personal loans, though they may not be explicitly called as personal loans.

Let us explore more about these loans and the situations in which they can be used.

What Forms of Long-Term Personal Loans are Available?

We can say that those forms of loans that are not bound by any end-use criteria can be categorized as personal loans. The longer-term personal loans are generally dealt by the traditional sources of financing like the banks or NBFCs.

Personal Loan

This is the classic form of a personal loan. The main features of this kind of loan are:

  • The loan can be availed by individuals over the age of 18 as long as they are capable of repayment
  • A good credit score is a requirement as the loan is not backed by a security
  • The tenures in traditional banks can range from 1-5 years
  • The maximum amount that can be borrowed on a personal loan is not fixed. It is dependent upon the income, credit score and repayment abilities
  • The rate of interest can start from 10% onwards
  • A processing fee as a percentage of the loan is chargeable
  • Personal loans generally carry a prepayment penalty and that too can be done only after a specified period
  • They are disbursed in lesser amounts of time

Additional Reading: Check which loans are available for individuals with low income

Gold Loan

These loans can be availed against the security of gold in the form of either jewelry, coins or bar. As with other personal loans, gold loan is not tied to an end use. The individual can choose to use it as per their needs.

Main features of the loan are:

  • The amount of the loan allowed is fixed at a percentage of the appraised gold value
  • A good credit score is not mandatory
  • A tenure of 1-3 years is allowed depending upon the lender
  • Less documentation is required as the loan is based against an asset
  • Accepted quality of gold is between 18-24 carat
  • A processing fee of 1-3% is charged against the loan
  • Interest rates on gold loans range between 9-15%
  • Gold loans can help you better your credit score if you are regular with your loan repayments

Additional Reading: How can gold loans help you improve your credit score?

Loan against Property

Real estate is a valuable asset that can be put to good use with a loan against a property. This loan also allows open-ended use of this asset. As high amount of loan can be availed, the amount can be used for purposes like funding higher education, starting up a business or purchase of a property.

Main features of the loan are:

  • Any immovable property like an apartment, a house, commercial complex or a piece of land can be mortgaged against the loan
  • The value of the loan is decided by the valuation experts of the bank
  • The value of the property depends upon clear title of the property, the age, the state of maintenance in which it is, and its location
  • 60-75% of the value assessed by the lender is allowed as a loan
  • An interest rate of 10-15% is charged against the loan
  • Tenures of these loans can be as long as 15 years
  • Extensive documentation is required as it is a loan based on an immovable property

What Forms of Short-Term Personal Loans are Available?

Short-term personal loans are those whose tenures are less than a year. The short-term loans are made available by fintech lenders. These lenders cater to even those who have bad / no credit score as they make extensive utilization of various consumer data points to make lending decisions.

Pay Day Loans

Month ends are tough periods for many salaried people as they face cash crunches. Sensing this financial need, companies like EarlySalary have come up with Pay Day loans  with main features of the loan as:

  • Instant approval and same day cash transfer
  • Zero physical documentation.
  • No foreclosure charges
  • Ten Minute loan
  • 3 Month EMI Option – For salaried (Greater than ₹50,000/- Month)
  • These loans can also be availed for shopping over Amazon or at Big Bazaar
  • Interest Charged is 2.5% per month
  • Processing Fee starts from Rs 150/-

Short-Term Personal Loans

These are just like the normal personal loans available from traditional lenders, the only difference being the tenure of the loan and the lending process. There are many fintech lenders in this space like PaySense, KreditBee, and Money View which specialize in short term personal loans.

Main features of this loan are

  • Complete Online Process
  • Easier and Lesser Documentation
  • Interest rates range between 1-3% pm
  • The tenures can be as short as few days or months
  • These loans are approved faster

Line of Credit

There might have been times when you availed a loan for a higher amount but realized much later that the amount was not needed in full. To help you in situations like these, short-term personal loans come in the form of line of credit. Companies like MoneyTap and Credy provide lines of credit.

Main features of Line of Credit* are:

  • Get instant approval for a credit line online
  • One-time approval, lifelong loan availability
  • Apply now and withdraw later during emergencies in one tap
  • Withdraw as little as 3,000 up to your full approved limit
  • Pay interest only on the amount used
  • No usage, no interest

For your easy comprehension, we bring you a comparison between Long-term and Short-term Personal Loans.



 Long-Term Personal Loans

 Short-Term Personal Loans


 1 – 5 years

 Few days to 1 year


 Traditional Bankers and NBFCs

 Fintech Lenders


 Some loans like Loan against Property does involve extensive documentation, while simple person loans are easy on documentation

 Easy Documentation

 Speed of Disbursal

 Not as quick

 Very fast

 Rate of Interest

 10-15% p.a depending upon the loan

 15-36% p.a

 Requirement of a Good Credit Score

 Mandatory for a unsecured personal loan

 Not mandatory


Loans comes in various hues and colors to meet your requirement for funds. However, never forget the basic premise paying back each EMI promptly so ensure that you remain credit healthy always.

* May differ between lenders