Whats The Difference? Short Term vs. Long Term Loans At some point in their lives, most people have mulled over the idea of applying for a loan. In fact, if securing a loan in the United States was a little easier than it is right now, most citizens would be knee deep in debt. However, […]
Whats The Difference? Short Term vs. Long Term Loans
At some point in their lives, most people have mulled over the idea of applying for a loan. In fact, if securing a loan in the United States was a little easier than it is right now, most citizens would be knee deep in debt. However, getting a loan in the united states isn’t easy. Though it’s possible to obtain title loans without proof of income nowadays, there is a ton of requirements that need to be met to secure other loan types.
When applying for a title loan, you need to provide collateral in the form of an asset, for instance, a car. A title loan where a car is used as collateral is known as a car title loan. Title loans are popular for two key reasons. These are:
- Title loans are approved quickly for amounts from as low as $100. The fast approval times are due to looser approval requirements.
- When determining qualifications, lenders of title loans overlook the applicant’s credit rating.
Title loans are easy to secure. There a lot of online title loan resources, you can find one in a matter of minutes. When looking for a title loan, a simple online search of the phrase ” title loans near me ” is enough to get you some options to muse on.
Car title loans are the most common type of title loan in the US. To qualify for a car title loan, you need to own the car outright. After signing the title over to the lender, you will receive a loan amounting to no more than 25 percent of the vehicle’s total value. The auto loan company will hold to the car title as collateral in case you default on the loan.
Properties of a Title Loan
Title loans are typically short-term loans. A short-term loan is a loan payable within a short time span. Depending on the amount, a title loan can be paid within a duration between 24 hours to 3 years — a loan exceeding three years cannot be said to be a short-term loan.
A long-term loan, on the other hand, is a loan payable within an extended timeframe. Long-term loans are credit based. Home improvement loans, start-up business loans, wedding loans, student loans, and mortgages are common types of long-term loans. While the major disparity between a long-term and a short-term loan is the payment duration, other differences exist.
Should I Apply for A Long-Term or Short-Term Loan?
If you are thinking about applying for a loan, here are some important factors to consider.
- Type of loan you are looking for. Common types of loans are personal loans, business loans, equity loans, student loans, mortgage, etc.
- Current interest rates. No matter what type of loan you choose, you need to consider the interest rate.
- Length of the loan – that’s where short-term and long-term loans come in.
- The amount of down payment required. High down payment equal lower monthly payments.
- The financial situation you are in at the moment. Look at your current financial situation. Do you really need the loan?
These factors will help you make an informed decision regarding whether to apply for the loan or not. If you are struggling to decide whether to apply for short-term or a long-term loan, you should know that both options have advantages and disadvantages. There are benefits of short term loans, and there are benefits of long term loans.
Some of the benefits of short term loans include:
- Quick money. If you are just looking for a lower amount of quick money to deal with an emergency situation, a short-term loan — such as a title loan — is the way to go. Short term loans are approved faster.
- No collateral. Some short-term loans don’t require any form of collateral to secure. This situation wouldn’t apply for a mortgage.
- More equity. If you apply for a short-term loan on your mortgage, it means that your line of equity will grow faster as the loan can be paid more quickly.
- Boosts your credit score. Short-term loans are paid within a short duration. It will give you an opportunity to increase your credit rating.
Some of the benefits of long term loans include:
- Build credit. Making regular, timely payments on a long-term loan will build your credit worthiness.
- Lower investor interference. In the case of a business loan, you can avoid investor interference by applying for a long-term loan. Helps you avoid liquidity issues.
- Lower interest rates. Long-term loans often come with lower interest rates than short-term loans.
There are many benefits and downsides of both long-term and short-term loans; it’s not even possible to name all of them. If you are thinking about applying for a loan, make the necessary considerations. You will be able to make an informed decision if you take some time to weigh your situation.
