Long Term vs Short Term Personal Loan – Which Tenure to choose?

Long Term vs Short Term Personal Loan - Which Tenure to choose? 1


Personal loans are a quick and easy way to get additional funds to pay for your personal needs, ranging from a wedding to getting your house renovated. A personal loan does not require a vast array of documents, and some banks even offer pre-approved loans for those with a steady income. The personal loan details range from one lender to another; however, an individual can opt for a loan worth Rs. 25,000 or even Rs. 1 lakh. It boils down to how credit-worthy one can be deemed based on their credit score and report. To pay off the loan, most banks now offer flexibility with negligible foreclosure charges.

Types of Loans

There are two kinds of loans that are important in this context:

Short Term Loans:

These loans should be repaid within 24 months at most. They are useful for smaller sums of money that need to be used almost immediately or shortly. Since a personal loan falls within this category, it is also considered an unsecured loan that does not need a collateral asset set up if the loan is defaulted on. Since the tenure is less, the personal loan interest rates can be higher.

Long Term Loans:

Concerning personal loans, long-term loans can be repaid for up to 60 months. However, for other kinds of loans, such as home loans, the tenure can be as long as thirty years. These loans have a higher value and may need a collateral asset, depending on the lender. Personal loan interest rates are lower since the tenure is higher.

Personal Loan

Difference between Long term and Short term loans

Each kind of loan has its advantages and disadvantages. Here are 5 differences between short term and long-term loans:


A short-term loan needs to be paid off in less than 24 months, whereas a long-term loan has 60 months.

Interest Rate:

Short-term loans have higher rates of interest in comparison to a longer-tenured loans.


Short-term loans require minimal documents, whereas long-term loans may require collateral and some additional documents.


Short-term personal loans do not require collateral assets if it is defaulted on, whereas long-term loans require collateral assets as a security measure.


The short-term loans have higher EMIs since there is a shorter duration to repay the loan than long-term loans. A personal loan EMI calculator is a useful tool to acquaint oneself with to keep track and make timely payments.

Which loan is for you?

While choosing the right kind of loan for you, you may need to assess your financial goals. Based on those goals, you can choose a loan that is best suited to you in terms of amount, personal loan interest rates, and EMI options. A long-term loan might make more sense to someone who has restrictions on monthly payments allowing them to benefit from the lower EMIs in the case of a long-term loan. Long-term loans also tend to make a better impression concerning credit records since the EMI payments are spread across a longer period of time and positively impact the borrower’s credit score. However, a short-term loan may be best when you need funds urgently, and its minimal documentation means that you can avail of it as and when you need it. Both kinds of loans are easily accessible and quick to get both online or offline in person.


It is best to conduct your research thoroughly before choosing a loan. Once you have a good idea for the extra funds’ purpose, choosing a tenure can be based on your financial abilities to repay the loan comfortably without defaulting and adversely affecting your credit history.

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