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Loan amount - If you need to borrow a smaller amount of money, a short-term loan may be a better option. Long-term loans are typically for larger amounts. Long-term loans also increase your total interest payment.
Interest rates - Generally, long-term loans have lower interest rates than short-term loans. However, this can vary based on your credit score and other factors, so it's important to compare rates for both types of loans.
Repayment period - Short-term loans typically have a repayment period of a few months to a year, while long-term loans can extend up to several years. If you need more time to repay the loan, a long-term loan may be a better fit.
Fees and penalties - Check for any additional fees or penalties associated with the loan, such as prepayment penalties, late fees, or origination fees. Some short-term loans may have higher fees or penalties than long-term loans.
Credit score - Your credit score may impact your ability to qualify for a long-term loan with a lower interest rate. If you have a lower credit score, a short-term loan may be a better option.
Expected bonuses or increments – If you are expecting a bonus or salary increment soon, you can go for a short-term loan as you will be able to pay the loan with the bonus or increment. Short-term loans have lesser interest outflow and hence you can save money.
Debt-to-income ratio – To manage the outflow of money, your debt-to-income ratio should be low. Short-term loans are cheaper but can affect the debt-to-income ratio as the monthly outflow is high.
Future Plans - Choosing a short or long-term loan is also dependent on your plans. Evaluate if you will need another loan shortly. Or will you be able to manage the EMI along with other expenses? These questions will give you a good insight into how much EMI you can manage.
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Duration - Short-term personal loans are generally offered for a period of up to 24 months.
Interest rates - The interest rates for short-term loans in India are usually higher than those for long-term loans due to the higher risk involved
Collateral - Many short-term loans in India require collateral such as property, stocks, or gold, which acts as security for the lender.
Loan amount - The loan amount for a short-term loan in India is usually smaller than that for a long-term loan, typically ranging from a few thousand to several lakhs.
Quick processing - Short-term loans in India are processed quickly, with some lenders offering instant approval and disbursement of funds.
Repayment - Short-term loans in India usually require the borrower to make regular payments, either monthly or quarterly, until the loan is fully repaid.
Purpose - Short-term loans in India are often used for emergency expenses, working capital needs, or to finance a specific project or purchase.
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Duration – Long-term loans are generally offered for a period of more than 12 months, up to 20 or 30 years.
Interest rates - The interest rates for long-term loans in India are usually lower than those for short-term loans due to the lower risk involved.
Collateral - Many long-term loans in India require collateral such as property, stocks, or gold, which acts as security for the lender.
Loan amount - The loan amount for a long-term loan in India is usually larger than that for a short-term loan, typically ranging from several lakhs to crores.
Repayment - Long-term loans in India usually offer flexible repayment options, with the borrower being able to choose the repayment tenure and installment amount that suits their financial situation.
Purpose – Long-term loans in India are often used for large purchases such as buying a house, or a car, or for funding a business venture.
Credit score - Long-term loans in India typically require a good credit score, as the lender will assess the borrower's creditworthiness and ability to repay the loan over a long period.