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Short Term versus Long Term Installment Loans

When you need money to make a purchase or to get you through a difficult time in your life, you may be wondering what your options may be. Luckily, there are several for you to choose from and you will need to think about how quickly that you can pay the money back.

When it comes to choosing the right loan, you will find that you have two basic options; long term and short term. Under each of these loan types, you will find that there are many other types of installment loans that stem from them. However, this is the first thing that you should determine when you are choosing a loan.

Short Term

A short term loan is one that is intended to be paid off rather quickly. There are many reasons that this type of loan is beneficial. For example, you are typically able to receive the money rather quickly. Some loan types require quite a few forms to be filled out and verification to take place through the lending institution. But, with a short term loan, you can usually avoid this process.

However, there are some downsides to this style of loan as well. For example, you will most likely be required to pay a larger payment, depending on the amount of money that you borrow in the first place. You may also find that the interest rate is a bit higher because lending institutions will be looking to make as much money on the loan as they can because you are paying it off in a short period of time.

Long Term Loan

A long term loan is basically the opposite as a short term loan. With this loan, you will be paying the loan off over the course of several months to several years. However, it is great for large purchases such as a house or a car and you will most likely be able to borrow more money than you would with a short term loan.

However, you will probably need to wait longer in order to receive your funds. Since it is usually for a larger sum of money, you will find that there are more requirements and documentation that you must turn in to the bank. While interest rates are likely to be lower, it may take a longer period of time to receive your money.

Which is Better?

Determining which loan is better really depends on the reason that you are seeking out the loan. This is the reason that banks usually ask what the reason for the loan is. That way they will be able to match the most attractive loan package to each client and be able to provide them with the best options for their situation.

For example, if you are looking to buy a home, you will probably want to pursue a mortgage installment loan. However, if you are simply looking to purchase a pool for the summer or go on vacation, you may be more interested in a short term loan.

Different Types

There are many types of installment loans and each has their benefits. It is important that you discuss with your banker the reason that you are looking for a loan so that you will be able to choose the best loan for your particular situation. Below are some of the most common types of installment loans.

  • Short Term

    • Unsecured

    • Secured:

      • Auto
      • Revolving Credit
      • Home Equity Line of Credit
      • Small item loans: computers, home appliances, etc.
  • Long Term

    • Unsecured
    • Secured:

      • Auto
      • Mortgage
      • Land
      • Recreational Vehicles
      • Home Equity Installment Loan
      • Student Loans

      Conclusion

      As you can see there are a number of loans available for you to choose from. Choosing between short term and long term installment loans may be easier to do if you know what your repayment plan may look like. You should sit down and decide on a budget before visiting your lending institution.

      You should also review the different banks and lending institutions in the area so that you will be able to find the one that fits your needs the best. Be sure to spend some time researching your options and seeing which interest rates are the best for you and your situation.

      By doing your homework in advance, you will be able to have a plan in order when it comes time to begin the loan process and will not be surprised as to how it effects your finances.