When considering a loan, one major decision is whether to opt for a short-term or long-term loan. Each has unique benefits and drawbacks that can affect your financial health.
Vizzve Finance breaks down how to choose the best loan type based on your financial goals and repayment capacity.
Understanding Short-Term Loans
Duration: Typically less than 3 years.
Interest Rates: Usually higher than long-term loans.
Repayment: Higher EMIs but paid off faster.
Best For: Emergency funds, small business needs, short projects.
Understanding Long-Term Loans
Duration: Typically more than 3 years, sometimes up to 15-30 years (like home loans).
Interest Rates: Often lower but total interest paid may be higher.
Repayment: Lower EMIs spread over a longer period.
Best For: Major purchases, education, home buying, or large investments.
Factors to Consider When Choosing
1. Your Financial Goals
Short-term loans suit urgent needs or quick projects.
Long-term loans are better for sustained investments.
2. Repayment Capacity
Can you afford higher monthly EMIs or prefer lower, spread-out payments?
3. Interest Costs
Short-term loans cost less interest overall but may have higher monthly payments.
Long-term loans mean paying more interest but manageable EMIs.
4. Loan Purpose
Match the loan tenure to your specific goal for optimal financial health.
Tips for Choosing the Right Loan
Assess your monthly income and expenses carefully.
Avoid borrowing more than needed.
Consider your job stability and future income prospects.
Use online EMI calculators to estimate payments.
How Vizzve Finance Helps You Decide
Vizzve Finance offers personalized loan advice and competitive loan products tailored to your goals and repayment ability.
FAQs
Q1. Can I convert a short-term loan to a long-term loan?
Some lenders offer tenure conversion options; check with your provider.
Q2. Which loan type improves my credit score faster?
Timely repayments on any loan type positively impact your credit score.
Q3. Are interest rates fixed or floating on these loans?
Both types can have fixed or floating rates depending on the lender.
Q4. Does Vizzve Finance provide loan tenure advice?
Yes, we help you select the tenure that fits your financial situation.
Published on : 10th August
Published by : SMITA
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