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Short Term Loan Vs Long Term Loan Which One Is Better!

Short Term Loan vs Long Term Loan

In certain situations, we may need to borrow money. You can take a loan for personal needs, medical emergencies, paying student tuition fees, automotive fees, or even travel plans.

There are two main types of loans that are available on the market today. They are short term loan and also long-term loans. In this article, we are going to discuss two different types of loans that are available today and know short term loan vs long term loan. 

Short Term Vs. Long Term Loans 

A short-term loan is a type of loan that you need for temporary personal needs. This kind of loan can be repaid up to 1 – 2 years after you borrow the money. The loan has to be paid off quickly, so it is called a short-term loan. In most cases, you are going to pay off the loan in about 6 months to 18 months. 

If you want to take a loan with a longer repayment period, you are going to take a long-term loan. This type of loan usually requires you to pay the loan in more than 1 year.

The long-term loan has a bigger limit than the short-term loan. Before you choose whether you are going to choose a short-term loan or a long-term loan, you have to ask yourself some of these questions. 

Why Am I Borrowing The Money? 

Before you decide to choose the right loan for you, you may want to take a look at your needs. Are you looking for quick money for immediate emergency needs? If yes, you are going to take a short-term loan.

The biggest difference between short term loan vs long term loan is short term loan usually gets approved faster than a long-term loan. If you want to buy a new house, car, or appliance, you can consider taking a long-term loan. You can also take a long-term loan for any of your business needs.

Sean Martin D. Plantado the head of the customer services note that the availability of credit in the Philippines leads to people borrowing money not only for critical situations but also for unnecessary things. This hurts financial discipline and the formation of a high credit rating.

How Much Money Do I Need To Use? 

This is another important question that you have to ask yourself. If you want to buy a house or a car, you may need more money than the one for buying any appliances.

You also need to borrow a large amount of money when you want to invest in your business needs. Short-term loans can be used to fund any small purchases, while long-term loans are usually used to buy expensive things.

How Much Interest Am I Willing To Pay?

You also need to consider the total interest rates that you are going to pay. The interest rates on typical loans are usually about 5 – 36% per year. Banks and also credit unions are able to offer competitive rates.

Your credit score will also determine your interest rates. With short-term loans, you are eligible to get a lower interest rate.

When you want to take a long-term loan, you may put some risks to the lender. Therefore, many long-term loans are going to charge more expensive interest rates than short-term loans.

How long can I repay my loan back? 

You also need to calculate how long you are able to repay the loan back. Long-term loans will not require you to make high monthly payments.

A short-term loan vs a long-term loan is it can be spread over an extended period. Therefore, you can pay fewer monthly payments than short-term loans. You can take a look at the rules and regulations of these loan options before you decide to choose the right loan for yourself.

If you want to take a big loan with a longer repayment period, you can consider taking long-term loans.

Top Loan Providers 

Loan Providers

There are several loan providers that are available today. They may offer different loan limits, interest rates, and also repayment schemes.

You can choose the right lenders with the best option for your needs. Some of these options include-

1. Banks

If you want to have a loan with a lower interest rate, you can consider taking bank loans. A lot of banks can provide business capital sources for a lot of business owners. This is another difference between short term loan vs long term loan.

Bank loans can provide more flexible and comfortable payment methods. You will also have a flexible loan repayment period when you take a loan from the banks.

However, many banks may require several requirements, such as a personal guarantee, credit standing, collateral, and also good credit score.

2. Private Lenders

There are some private companies with investors that are available in the Philippines. They can provide personal and business loans. If you are not qualified to take a bank loan, you can consider taking a loan from private lending companies.

They usually have a straightforward application process. They can offer easy access to the loan and also a simple process. They usually only ask you to provide proof of billing, proof of income, and also proof of identification. Some of them are ready to approve the loans in less than 24 hours.

3. Government Loans 

The government is also trying to help all Filipinos with these government loans. You must be an active member of the government agency before you can start your loan application. 

Some of these agencies are SSS, GSIS, and also Pag-ibig. Joining these agencies can also increase the chance of getting your loan application. 

Daily contributions and registration are required when you want to get your membership in these agencies. When the loan is approved, the payment will be deducted from your salary and sent back to the government agencies.


There are a lot of options for the short term loan vs long term loan that you have when you want to get a loan. Your choice of loan will depend on a lot of circumstances, such as your past loans, credit history, and also credit score.

You also need to determine your loan terms, the total money that you are going to borrow, and the ideal interest rate for your cases. It is also important for you to practice healthy financial habits, such as investing and saving your money as early as possible.

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Arnab Dey

Arnab is a passionate blogger. He shares sentient blogs on topics like current affairs, business, lifestyle, health, etc. If you want to read refulgent blogs so please follow RSL Online.

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