The first question that comes to the mind, even before applying for a loan, is how long will it take to repay the loan. The duration of repayment is also a constraint due to which many people back out from applying for a loan. If you compare two loans with the same principal amount, the duration of the loan repayment is often the deciding factor for the monthly installment. A loan with a short duration of repayment will have a higher monthly rate of installment than the one with higher repayment duration.
Often people refrain from applying for short-term loans because of the fact that the monthly amount of repayment is larger. But if you think wisely then these are actually by far better than long-term loans. Want to know why? Then it is best that you keep on reading this blog.
1. The interest rate is less The rate of interest is inversely proportional to the tenure of loan repayment and therefore it is a clear fact that the longer the duration, the lesser the rate of interest on the principal amount for the same. Therefore you will ultimately be able to close the loan faster and start making savings again fast.
2. Lesser risks in the future Life is unpredictable and so are your finances. You may not be certain of the fact whether you will be able to keep on repaying the loan after ten years, but you can still calculate for the next five years. So, there are more chances of you being capable of repaying short-term loans, thus reducing the risk of the inability to repay the loan.
3. It is less stressful in the long run Once you take a loan, you will continuously be stressed about the fact of repaying the loan and if this is a long-term loan, whatever be the amount, imagine the kind of stress build-up. So, a short-term loan will mean that you will get rid of the stress faster.
4.Your credit score gets boosted If you are applying for a short term loan and paying it on time with a bit of careful planning, then the best thing that you will achieve is an improved credit score which is undoubtedly going to help you in future in getting another loan, if required.
5.No requirement for Collateral Some financial institutes give the freedom of applying for short term loans without the requirement of any collateral which can be helpful for many loan applicants.
6.Your loan will be processed faster Applying for short term loan is beneficial in terms of the processing of the loan application. So, if you need money on an urgent basis then nothing is better than a short term loan which gets processed faster than loans with longer durations of repayment. So now that you have come to the close of this blog, you might as well agree with me when I say that a short term loan is definitely beneficial considering all the above factors. So, it shall be ideal for you as well to opt for a short term loan instead of a long term one, if you have any requirement for a loan at any point of time.