Term loans are borrowings from banks or other financial institutions for a fixed tenor, where repayments are made over a period of time, in easy installments. The terms of the loan may vary from 30 days to 30 years as is agreed between the lender and borrower. The interest rates on term loans may be fixed or floating in nature.
Based on the tenor of loans, we can categorize them into short term loan and long term loan. The decision to choose between short term and long term loan results in the final loan amount borrowed and how much interest will be payable.
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Whether financing is required for a new property purchase or working capital requirement, the amount of money you borrow and interest rates are probably your top priority when deciding on the type of loan. You don’t borrow enough and it may lead you to need another loan. Borrow too much, and you may not be able to pay it back on time, notwithstanding whether it is a long-term loan or a short term loan. Ultimately, deciding between short term and long-term loans comes down to assessing your explicit need for finance.