A loan is a common way to get funds during need, but finding the right loan takes work. Making a wise financial decision is essential, as several conditions back any long-term or short term loan. Before taking a loan, you should understand its terms, benefits and risks. A loan taken without researching will only intensify your financial stress. Hence, understanding the intricate details of a loan type and tenure is necessary.

What are Term Loans?

A term loan refers to a specified period for the repayment of debt along with interest.

A term loan can be classified into:

● Short-term loan

● Long-term loan

Short-term Loans: Meaning & Examples.

It has a validity period of three years or less. This debt comes with a few approval criterions wherein the loan amount gets credited instantly, sometimes within a few hours. A few examples are Personal loans and Two-wheeler loans.  

Long-term Loans: Meaning & Examples.

It has a validity period of three years that may extend up to 30 years. It may be secured or unsecured. Usually, this form of loan requires collateral or a surety. For example – Home Loans or Car loans. 

Pointers to Consider before availing Term Loans:

A few factors to look at are: 

⮚ Objective: Short-term loans are easier to obtain in case of emergency requirements without many credit checks. However, long-term loans are taken out for a longer tenure, such as construction, education etc. They’re a little difficult to obtain approval.

⮚ Interest Rates: Interest rates are higher on a short-term loan and comparatively lower on a long-term loan.

⮚ Qualification & Paperwork: Short-term loans are approved easily, such as a personal loan. Document requirement is low in personal loans. In contrast, a long-term loan requires extensive documentation and takes longer for approval.
Ultimately, the type of loan you require will depend on the occasion and purpose. Before finding the right long-term or short-term loan, you need to consider their benefits and risks.

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