long term loansOver the last few years, the banking industry has become increasingly strict about issuing loans. Before you set out to borrow money, decide exactly how much you need and how long you will need to repay that amount. This will determine what kind of term loans are the best fit for your financial needs.

Here is a quick breakdown of the pros, and the cons, of both kinds of loans.

Long Term Loans: The Pros

  • The size of the loan. If you do qualify for a long term loan, then you can receive enough funds for a car, the down payment on a home, or cash to infuse into your business
  • Lower monthly payments. Long term loans cost more in the long run, but the monthly payments are usually much lower.
  • Highly competitive rates. When banks compete against one another, then the consumer wins a prize of lower interest rates.

Long Term Loans: The Cons

  • Red tape, paperwork, and hoops to jump through. If you want to qualify for a large loan with low interest rates, be ready to spend a lot of time proving you are a good risk. There will be a lot of paperwork to fill out and assessments to pass.
  • This loan approval process is usually quite time consuming, and sometimes you can’t afford to wait.
  • Sometimes there are application fees to pay, whether or not you end up being approved.
  • If you default on a long term loan, then you risk losing that car, home, or business.

Short Term Loans: The Pros

  • Available despite your credit score. If you have bad credit, or no credit at all, short term loans may be your only option. Many short term lenders run cursory credit checks, or don’t run any credit evaluation at all.
  • A simpler application process. There is much less paperwork to fill out, and often times it can be done entirely online with no faxing or physical paperwork required.
  • Fast cash. You may not have days or weeks to wait on loan approval. Usually, short term loans have a fast turnaround time, and you can have your funds within 1 to 2 business days.
  • Fast repayment. These loans are designed to be fully repaid within a few weeks. If the loan is repaid promptly, then the debt is resolved just as promptly. That gives you one less thing to worry about.

Short Term Loans: the Cons

  • Smaller loan amounts. Most loans are also small dollar loans, ranging anywhere between $100 and $1000. This means they are best suited for more minor expenses and bills, instead of cars and property.
  • Higher interest rates. The biggest drawback to short term loans are the inflated interest rates. If the loan is repaid quickly, then the interest is very manageable. If you let the loan get away from you, and you need a long time to repay it, the interest can be staggering.

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