54% of people in Canada have long-term financial plans. These can help you manage your budget on a daily basis and save for bigger purchases in the future. However, no matter how much you prepare, things don’t always go to plan. In the last six months, the cost of living in Canada has increased significantly. This is leaving a lot of people struggling financially. If you are concerned about your finances, help is at hand. Long and short-term loans can help you secure the capital for large purchases or emergency payments you might not be able to afford.
Or they can just ease the financial pressure of daily life!
So what is a short-term loan and how is it different from a long-term loan? Read on to find out everything you need to know to help you choose the right option for you.
A Short-Term Vs. Long-Term Loan: Getting Approved
Before you can take out a loan, you first have to apply to a lender. They will review your application and may look at your credit history before approving your loan.
The length of this process can vary depending on the type of loan you apply for. Typically, short-term loan lenders approve applications much quicker than long-term lenders. In fact, you should hear back on your short-term loan application in a matter of days or even hours!
So if you are looking to secure a loan quickly, this is the best option for you.
Repayment Terms For Short and Long-Term Loans
As their names suggest, short and long-term loans offer different repayment schedules.
Both involve making regular loan repayments plus interest. These usually happen on a monthly basis, although some lenders offer more flexibility.
However, with a short-term loan, the repayment period is much shorter. This is usually a matter of months and doesn’t normally exceed a year. Long-term loans can be repaid over a number of years.
This means that it is much quicker to pay off a short-term loan. Of course, this can drive up the cost of your monthly repayments. As with any loan, it is important to look at your budget and figure out if you will be able to make your loan repayments before accepting it.
If you are planning to borrow thousands of dollars you might be better off taking out a long-term loan. This spreads out the repayments so your monthly payment will be less. However, a longer repayment period also gives the interest more time to build up.
For smaller loans, a short repayment period gives you less time to accrue interest on your loan. So you will be debt-free as soon as possible.
Interest Rates on Short and Long-Term Loans
Short-term loans typically have higher interest rates than long-term loans. Your interest rate is the amount that you pay each month on top of your loan repayment. This is how lenders make money.
For example, let’s say you borrow $500 with 20% interest over a 4-month repayment period. Your monthly repayment will be $125 plus $25 interest. So you will end up paying $100 in interest on your loan.
Long-term loans generally offer lower interest rates. However, you will be paying back this interest for a number of years, rather than months. Because of this, it is worth calculating how good a deal you are actually getting in the terms of your loan.
For example, the interest on a $7,000 loan for 2 years at 5% will be $14 per month. While the percentage sounds a lot lower this can seriously add up over the course of a year or more. Over 2 years, this adds up to $336 worth of interest.
Getting a Loan With Bad Credit: Which is Your Best Option?
Your credit history can have a big impact on the terms of your loan, especially if you are looking for a long-term loan. Most lenders use this information to determine how much of a risk it is to lend you money.
Because of this, people with poor credit scores are often offered much higher interest rates on long and short-term loans. You may even struggle to find a lender who will approve your loan at all.
Fortunately, help is at hand. Some short-term lenders offer no-credit-check loans. These can have higher interest rates but offer you quick access to financial support, no matter your credit history.
Which Loans Offer the Most Flexibility?
Taking out a loan is a serious financial commitment so it is something you should think about carefully. The terms of your loan will tie you into a legal contract with your lender for the length of the repayment period.
This will also show up on your financial history. For example, if you are applying for a mortgage, any current loans will appear on your lender’s checks.
This is another reason why a lot of people opt for short-term loans over long-term ones. Again, this depends a little on the amount of money you need to borrow.
However, the beauty of a short-term loan is that it is just that: short! Provided that you can cover your repayments, you will be loan and debt-free by the end of your contract.
This can put you in a better position for applying for other financial support, such as a mortgage. It also means that you don’t need to factor in your loan repayments for an extended period of time.
Get Help Finding Short-Term Loans Today
As you can see, short-term loans are a great option for people looking for quick cash and don’t require a long-term financial commitment. They ensure that you pay off your loan and are debt-free as soon as possible.
Want help getting approved for short-term financing? Then head over to Kingcash now to apply for your no-credit-check cash loan. We’re happy to help.