Should I Get a Long-term or Short-term Loan?

See which personal loan type meets your current financial requirements

Personal loans have long been considered financial crutches for the financially burdened, but does it do more harm than good? There are several reasons to get a personal loan, but these are generally paid back with interest within a specified period. Although there are a number of personal loan types, all these fall under two main categories: short-term loans and long-term loans. Aside from the obvious difference of tenure, these two also differ when it comes to certain fees, restrictions, and benefits.

Short-term Loan Pros and Cons

As so named, short-term loans are those with a tenure of one to three years. Many people turn to this type of loan in cases of emergencies, such as house or car repairs, hospitalisation, and other unexpected expenses. A common short-term loan is the payday loan, which deducts the payment from your bank account on your next pay date.

One advantage of short-term loans is their quick approval times. With minimal background checks and no collateral required, they are the very definition of ‘quick cash.’ Quick approval times come at a price, though, because short-term loans have a higher annual percentage rate (APR), which means that, although you may have smaller instalments, you will pay a larger overall interest or profit rate. Because you’ll have to pay them within a shorter period, they’re also limited when it comes to the maximum loan amount. Many providers offer short-term loans, however, so availability is almost never a concern.


Regarding the setup and other fees, these will depend on the provider, as different providers may charge different fees. Take note that long-term loans charge a fee for early repayment so short-term loans will have higher fees in comparison. Some providers also offer the option to extend the loan tenure past the agreed upon date. This flexibility is one of the reasons why many who don’t qualify for traditional loans from banks and other larger institutions turn to short-term loans.


Long-term Loan Pros and Cons

The long-term loan is the more traditional type of loan with fixed instalments and a more or less fixed tenure. Main advantages of this loan type include smaller monthly instalments that are fixed throughout the whole repayment period. This makes it easier to include into your regular budget because you’ll always know when and how much to pay. A long-term loan also provides more leeway via a larger maximum loan amount, making it possible to consolidate your other unpaid debts into one loan.

Of course, long repayment periods mean you’re also paying a higher interest overall. If you want to repay your loan early to avoid this, you may have to pay a fee, which will depend on your loan provider. Long-term loans are also preceded by longer and more stringent background checks, with loan approval and amounts being subject to this and your current credit score. Depending on how much money you need, a long-term loan may require some of your assets or property as collateral.


When it comes to personal loans, never bite off more than you can chew. It can be tempting to get a short-term loan, but remember to read the terms and conditions carefully and ask a lot of questions so you know what you’re getting into. If you fail to repay your personal loan in time, you may need to take out another one, and another one, until you’re buried up to your neck in debt.

Let GoBear help you choose the personal loan product you need. Compare personal loans from different providers at GoBear today!

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