The differences between a short-term loan and long-term loan
Term loans, in general, are common among businesses today. Term loans are generally referred to as a lump sum of money which may be deposited by a lender into the account of a borrower. When the term loans are fully contracted, borrowers repay such loans with an interest over a period of time.
The important information is that there are variations in term loans. These are known as short term loans and long term loans. Long term loans and short term loans are possible. You just need to know which one works for you and apply it.
Long term loans are granted over a long period of time while short term loans cover a short period of time. The various differences between long term loans and short term loans include
· Eligibility requirement
· Loan amount
· Interest rate
1. Eligibility requirement
In past, only those that are qualified borrowers are eligible for long term loans. This is because lenders often face more risk of nonpayment as a result of long term loans.
While lenders give out money for a long period of time, they need to be conversant with whom they are borrowing money. Both long term loans and short term loans can only be decided by the lender. He will access the eligibility status of the individual so as to know which one to give.
In short term loans, eligibility requirement includes
· 9 months or more in business
· 550 or more credit score
· $50000 or more annual revenue
While in long term it involve
· 2 years or more in business
· 640 or more credit score
· $100000 or more annual revenue
2. Loan amount
The loan amount offered to long term borrowers is larger than that of short term borrowers. The amount of money a lender can loan depends on the burrowed business online auto loan application. Any loan granted depends on the lender himself.
Short term loans range from $2500 - $250,000.
Long term loans range $5000 -$500,000.
No doubt you will notice the fact that as long term loans lengthens, the potential amount increases as well as the eligibility. Also as short term loans lengthen, the potential amount increases as well only by a shorter amount. It can never be compared with that of a long term loan.
3. The interest rate
It is obvious than loan amount never comes for free. Interest must always be attached. You will definitely have to pay back the lump sum in addition to the interest rate attached. It does not stop there as any additional fees will also be required.
The interest of long term loans will be higher than that of short term loans.
When considering getting a loan after bankruptcy, it important to select either a short term loan or a long term loan depending on your pocket.
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