Short-Term Loan vs. Long-Term Loan in India

Nowadays, making ends meet is becoming a hurdle for an average-earning person. With high living costs, finding yourself in a tight financial spot is very easy. Luckily, there are loans in India that are becoming a common financing option and can help bridge that gap. Despite that, finding the best loan option isn’t child’s play. With many financial institutions and financial products, you have to choose from, it is very easy to get confused.

Since there are many loan options, you can get confused about the right decision to take. If you make the right choice, you will be the happiest person; if not, you will be in a deep financial mess. There are factors to consider before you avail of a loan. One of them is loan tenure. You may choose either a short-term or a long-term loan, depending on why you’re taking the loan.

Furthermore, the loan tenure determines the interest rate and amount to repay monthly. Therefore, consider every detail concerning the loan to determine if it is the best choice for your prerequisites.

Without further ado, let’s have a look at the common types of loans which are short-term loans and long-term loans, to help you make an informed decision:

Short-Term Loan vs. Long-Term Loan

Short-term and long-term loans are very different, and as a borrower, you will want to know what each loan constitutes in terms of interest rates, repayment duration, collateral, and so on. Continue reading to know how these loans differ:

Amount of the Loan

One of the major differentiating factors between a short-term and long-term loan is the loan amount. The higher the amount, the longer the repayment period. This applies to long-term loans since they have a long repayment tenure. On the other hand, the lower the amount, the faster the repayment, which is true in the case of short-term personal loans, as they have a short repayment period.

Interest Rates

Usually, short-term loans have a high rate of interest. The reason why they offer a high rate is to compensate for the short repayment period. Short-term loans do not require collateral, making them riskier for the lenders when the borrower doesn’t repay on time. Consequently, long-term loans come with a lower interest rate because they have a longer tenure, and at the same time, they require collateral before you can get one, making them less risky for the lender.

Approval Process

Many borrowers prefer short-term loans since they can instantly get cash when in a financial crisis. Short-term loans are approved quickly, and the application process is very easy, thanks to minimal documentation needed. You don’t have to go through the hassle of providing many documents to the lender. Only documents for proof of income, identity, and address are needed for the loan to start being processed.

On the other hand, long-term loans will only be approved after the eligibility criteria and the borrower’s creditworthiness is thoroughly assessed. Besides, before the secured loans’ approval, the asset’s market value is also assessed. The short-term loans are approved within minutes, if not hours, and you receive your funds in your account immediately, which isn’t possible with long-term loans.

Repayment Duration

Short-term loans have a short repayment duration ranging from 3 to 15 months. That’s why they are called short-term. As for the long-term loans, the loan tenure can vary between 3 to 30 years allowing businesses to distribute repayment over a long period.


Generally, long-term loans come with a high amount and longer repayment period. This implies that the repayment will continue for a long period. Since it is a long time, the lender needs collateral to act as a security. When the borrower fails to repay all the debt, the lender can sell the assets and recover the remaining debt. Short-term loans are unsecured, so no collateral is involved. However, the lender will look into your credit history, income, and other factors before giving you a loan.

Purpose of the Loan

Though the funds required for a business vary from one company to another, it depends on the size of the business, the goals, and the operating cycle. Short-term loans are ideal for meeting any regular operational fees of the firm.

Long-term loans are the best for scaling a business because it takes a long time for the firm to make profits and stabilize its revenues. This could make the repayment of the loan much longer.

Which Loan to Go For?

There’s no right answer when deciding the loan to choose between short-term and long-term loans. The choice depends on your needs and the ability to repay the loan. If you want a loan with easier installments without putting much stress on yourself, a long-term loan is a good option. On the other hand, if you want a personal loan, you can avail it through lendingplate. It is registered NBFC which provide short term loan tenure with 3-15 months at affordable interest rates.

However, your age also matters here. Those in their late 40 and 50s will find it hard to get a 20-year long-term loan because they will be nearing their retirement. So, ensure you are in the range of age needed by the lender, with the minimum age being 21 years.

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