What Are the Top Advantages of Short Duration Loans

The duration of loan is one of the most important decisions when hiring a loan lending firm. A lot of people do not pay much attention to it. This factor is equally important as loan amount and interest rate. When given a choice between a short-term and long-term loan, you need to know the pros and cons of both these types of loans. There are a few benefits of short-term loan that makes it more advantageous than a long-term loan.

What is the difference between a short-term and a long-term loan?

In a väikelaen, the amount is provided for a small duration. The monthly payments, in this case, will be higher as compared to a long term one. This implies that the principal amount has to be repaid in the form of few but larger pieces.

On the other hand, in case of long-term plans, the loan repayment duration is more. You need to pay more monthly installments but the amount will be less as compared to what you repay in case of a short-term loan.

Less expensive

When calculated the amount of loan you paid back to the lender, it comes out that long term loan is expensive as compared to short term loan. You are actually repaying less in a short-term loan as compared to what you repay in a long-term loan. This is because the longer you owe money to the lender, more interest gets accrued to your balance.

Though monthly installments are low, you need to pay back more amount of money as compared to short-term loans.  In this way, short-term loans can prove to be a good option that really makes financial sense. It helps in saving money in the future.


Compared to long-term loan, it is quite easy to predict your finances and budget for a short-term duration.

Lower stress

Owing loan for a long term and watching interest to get accrued takes a psychological toll. With a short duration loan, you pay the debt much sooner and get relieved of the burden quickly.

Credit Score Boost

Getting a short-term loan and repaying it within specified time is a good way to enhance your credit score fast. This is often a tactic that people employ to boost their credit score.

More Equity

In case of mortgage loans, a short-term implies that you are building corpus or equity in your house at a quick rate.

No Collateral

Short-term loans do not need a collateral. This is an interesting feature of these loans.


With these benefits, it is very clear that short-term loan is a cost-effective and wise decision for any loan applicant.