At some point, most individuals and businesses will require more cash than they have on hand. Large purchases like homes, business investments, college, and more usually require a loan. What kind of term loan you get depends on what you buy and your qualifications.

Banks and other financial institutions meet the need for loans with both short and long-term loans. Many businesses plan projects that require funding. Loans ensure enough cash flow to expand and grow the company without going broke. Understanding the difference between the two types is essential before deciding which loan to choose.

Short Term Loans

Whether a loan is short or long-term depends on the time it will take to pay back. Short-term loans are typically paid back within a few months to a year. These are usually for quick purchases that will receive almost immediate repayment. The business or individual won’t need more than a year to repay the loan. Short-term loans are smaller amounts to ensure they can be paid back within the timeframe.

Short-term loans usually have higher monthly payments. This divides the amount into fewer payments and pays the loan off faster. Since the repayment is faster, less interest is charged. Though lenders will protect short-term loans with higher interest rates, speedier repayment still results in less money paid. In addition, it’s easier to qualify for a short-term loan because lenders are less worried about losing money from an unreliable borrower.

Businesses often get short-term loans for unexpected projects or to help purchase equipment. For example, House flippers get this type of loan to help finance the work before selling the house for profit. Cash advances, invoice financing, and installment loans are different types of short-term loans.

Long Term Loans

Long-term loans take a significantly longer time to repay than short-term loans. These loans are almost impossible to pay off within a year. Short-term loans are associated with a need for fast cash in small amounts. Long-term loans are for more significant transactions and smaller monthly payments over an extended period.

The lower monthly payments make it more manageable for someone who doesn’t make large monthly paychecks. However, the repayment takes much longer, usually about 15-20 years. Interest is technically lower for these loans, but the payback time means you pay more.

It is much harder to qualify for a long-term loan. Investors are taking a more significant risk on you with the amounts of money handled. If you don’t have a good credit score or payment record, you might your bank could deny access to a loan.

These types of loans are traditionally acquired for buying a home, college tuition, buying a car, and more. In addition, businesses obtain long-term loans for opening secondary locations, funding large projects over time, and other expensive investments. These loans help companies continue to grow, despite not having the cash to pay for costly projects.

Short-Term Business Loans with Nufi

Whether your business is having financial trouble or you just want to keep it running smoothly, Nufi is here to help. As a financial services company, we aim to provide businesses with profitable solutions that suit their unique needs. Our expert data analysis and problem-solving help you find a solution for even the most challenging issues. We provide both types of term loans to help you achieve your business goals.  Contact us today if you have questions or want to learn more about how our term loans can help you!

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