When you are about to buy a home or a car or when you have some major expenses, you tend to apply for loans. Applying for loans has become an inevitable part in human life. As there is demand for loans, the lenders also compete the loan market with various types of loans with attractive features. However, not all are genuine and dependable. Some of the loans are very costly and all the applications of loans are not always considered. It is essential to make a patient search before you decide on a loan offer. The features of each of the offers should be studied carefully so that you make the best out of it.

Know the differences between short term loan and long term loan

Whatever the loan type is, the basic differences between short term loans and long term loans should be understood so that you proceed accordingly. The advantages and the disadvantages of the loans should be observed. The monthly payments are higher for short term loans than for long term loans. Those who are struggling to manage regular monthly expenses can opt for long term loans so that the repayments are not very stressful. Since the term is long, you end up paying more towards the interest alone. This is unavoidable in your financial crisis. However, you can limit the amount of loan and borrow just as much as you need and not more so that the repayments are lower.

The short term loans are comfortable for those who can pay more towards monthly repayments. The interest rates are lower for short term loans. The entire loan gets settled in a short time. Prior to applying for short term loans, you should calculate the repayment amount to understand whether you will be able to manage the repayments with ease. Instead of struggling with high monthly repayments, you can look for long term loans and make additional amount towards payments whenever possible and clear the loan at the earliest. It is upto you to decide whether to opt forlong term loan with lower monthly repayments or short term loan with higher monthly repayments.

Why you need funds is an important factor to decide whether to apply for long term loan or short term loan. If the option is home loan or home equity loan, it is recommended that you go for long term loan as the loan amount tends to be huge. For smaller requirements, you can apply for short term loan as it is easy to settle the loan in a short time. It is important to analyze whether the value of the property that you are about to purchase is worth the total loan payment. These are the factors that decide whether it is advisable to go for long term or short term loan.

Long term loan requires you to make lower monthly payments. This option is ideal for the ones who cannot afford much currently but have good scope of income in future. Committing to an investment will prevent you from spending lavishly for unnecessary purchases. You might want to save or spare for clearing the loan. Long term loans cost you more due to the interest payment for longer time. However, when you decide to invest on a home, it is worth as the property keeps appreciating generally. As for the purchase of vehicles, it is recommended that you do not consider long term loan as the value is sure to get depreciated by the time the loan term expires.

If you decide to dispose your vehicle after some years of usage, you can clear the loan and keep some money for yourself if you avail short term loan. If the term is longer, you would have ended up paying more for the vehicle than the real worth at the time of disposing the same. For students who are freshly employed, long term loans are beneficial as the repayments are manageable. However, the loans can be cleared by paying additionally every month when you can afford. Whether it is a short term loan or long term loan, it is necessary to make exact calculations to understand whether the repayments are not stressful for you.

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