How long is short-term loan?
In comparison to long-term loans, short-term loans are loans that are paid off in a short amount of time, usually between 6 months to 1 year, although there are some that can be as long as 18 months. Short-term loans are intended for small amounts of money that can be paid back quickly.
Financial institutions usually give short-term loans, generally for a period of 1-2 years. These are primarily unsecured, so you don't have to pledge collateral as security to avail of them.
The best 3-month loans are from friends or family members because no major personal loan provider offers repayment periods shorter than 6 months. Alternatively, you could use a credit card to finance your expense or get a personal loan with a longer repayment period and pay it off sooner than you're required to.
Typical personal loan terms vary by lender, but are often two to seven years. Some lenders offer terms as long as 12 years, but that's typically if you've borrowed a large amount. A personal loan with a term of three years or less may be considered a short-term loan.
They often require little to no collateral, making them seem very attractive in a crunch. In exchange for the convenience, however, you'll pay steep interest rates and high fees. The repayment timeline also may only be a few weeks long. For these reasons, short-term loans are best approached with caution.
Short-term loans typically have a repayment period of one year or less, with some as short as a few weeks or months. Conversely, long-term loans have a more extended repayment period, often ranging from several years to several decades.
Short-Term Debt is any financing that will be paid back within the current 12 months.
| Loan duration | Average monthly payments ($3,000 loan) | |
|---|---|---|
| Poor credit | Good credit | |
| 1–12 months | $486.76 | $308.32 |
| 13–24 months | $243.39 | $159.67 |
| 25–36 months | $129.93 | $107.48 |
| Payoff period | APR | Monthly payment |
|---|---|---|
| 1 year | 15% | $451 |
| 2 years | 15% | $242 |
| 3 years | 15% | $173 |
| 4 years | 15% | $139 |
The monthly payment on a $30,000 loan ranges from $410 to $3,014, depending on the APR and how long the loan lasts. For example, if you take out a $30,000 loan for one year with an APR of 36%, your monthly payment will be $3,014.
Which loan is cheaper short-term or long term?
Short-term financing can be for periods as short as weeks (or even days), or as long as one to two years. Short-term financing is somewhat riskier than long-term, but it also tends to be less expensive and offers greater flexibility to the borrower.
Short-term loans are designed to help you get emergency money, usually to tide you over until you get paid. The money is paid directly into your bank account, so you're free to spend it how you want. You'll agree an amount to borrow and can usually choose between one to six months to repay it back.
You can use a personal loan to make many types of purchases, including a car. Auto loans tend to have lower interest rates than personal loans, and longer repayment periods. Auto loans generally have lower interest rates because they use your car as collateral.
Short-term loans can hurt your credit if they are not managed responsibly or if they require a hard inquiry into your credit, which can drop your score by about 5-10 points.
Con: The high-cycle risk
You take out a short-term loan because you need the money. If cash flow is really tight, you run the risk of not being able to make the payments on that loan—which can mean needing another loan to make the original payment.
Short-term loans are often focused on smaller dollar amounts, making them a bad fit for larger financial needs. And the high interest rates of some short-term loans mean even if you can borrow more, it won't be a sound financial decision.
Loans with shorter terms usually have lower interest costs but higher monthly payments than loans with longer terms.
Any lease for less than 12 months is considered short-term. You can find short-term apartment leases for three months, six months, nine months or even month-to-month. Monthly leases generally renew automatically each month as long as you and your landlord both agree.
If the term of a debt instrument is three years or less, the applicable federal rate is the federal short-term rate. Terms of over three years but not over nine years. If the term of a debt instrument is over three years but not over nine years, the applicable federal rate is the federal mid-term rate.
You can get short-term loans from banks, credit unions and other lenders. Depending on where you choose to get your short-term loan, different loan amounts, fees, payback periods, and interest rates may apply. Qualifying for a short-term loan also typically depends on the lender.
How long do you have to pay back a short term debt?
Key Takeaways
Short-term debt, also called current liabilities, is a firm's financial obligations that are expected to be paid off within a year. Common types of short-term debt include short-term bank loans, accounts payable, wages, lease payments, and income taxes payable.
Some of the easiest loans to get approved for if you have bad credit include payday loans, no-credit-check loans, and pawnshop loans. Personal loans with essentially no approval requirements typically charge the highest interest rates and loan fees.
| Payoff period | APR | Monthly payment |
|---|---|---|
| 12 months | 15% | $542 |
| 24 months | 15% | $291 |
| 36 months | 15% | $208 |
| 48 months | 15% | $167 |
| Payoff period | APR | Monthly payment |
|---|---|---|
| 2 years | 15% | $485 |
| 3 years | 15% | $437 |
| 4 years | 15% | $278 |
| 5 years | 15% | $238 |
A $20,000 loan at 5% for 60 months (5 years) will cost you a total of $22,645.48, whereas the same loan at 3% will cost you $21,562.43. That's a savings of $1,083.05. That same wise shopper will look not only at the interest rate but also the length of the loan.
