For catering to the needs of individuals in times of a financial crisis, there are several lending companies and institutions that offer many different types of loans. A loan is a cash or credit advance offered to an individual, with an obligation on him or her, to pay it back along with any accrued interest. There are basically two broad categories of loans depending on their tenure, namely the short term and long term loans.

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What are short term loans?

A loan that is taken out for a time period of less than three years is often referred to as a short term loan. An example of such a short term loan is a payday loan, which can be used in the event of a small financial emergency such as a car repair, a road trip or a medical contingency. A payday loan is a quick cash loan that provides you funds to deal with your financial crisis, and puts you under the obligation of repaying the principal amount, and any interest, by your next pay day. Several lending companies in Canada offer pay day loans to anyone, even the individuals who have a bad credit score or no credit score in Canada. Another example of a short term loan is a flex pay installment loan that offers the borrower a facility to pay back his loan amount in several scheduled installments over a longer period of time, instead of having to repay the whole amount in one lump sum. While most companies expect the entire payment to be repaid over a period of twelve months, some of the lenders also offer the facility of spreading out the installments for up to three years.

What are long term loans?

As the name suggests, a long term loan is taken for a period of more than three years. The most popular long term loans are education loans, business loans, mortgages or car loans. With the risk involved in the repayment schedule of a long term loan, the lenders make extensive credit checks, prior to accepting the application of an individual. As per the credit score of an individual, the company offers him varying interest rates, for example a good credit rating would imply a lower interest rate charged. The long-term loan may be further classified into secured or unsecured loan. A secured loan requires the borrower to provide a collateral or asset as a backing of his credibility in repaying the loan. On the other hand, an unsecured loan does not require any collateral and thus demands a higher rate of interest from the applicant, owing to the enhanced risk on the lender.

What are the main differences between a short term and a long term loan?

  • It is easier to get a short term loan compared to a long term loan, as the access to funds is quicker for short term loans. The risk involved is lower, and the application and disbursement process of a short term loan is faster and less complicated.
  • A short term loan is usually availed to meet any sudden urgent financial requirement, whereas a long term loan is more often than not, used for large investments or future projects.
  • A short term loan involves a lower level of risk for the lender, as compared to a long term loan. The odds of a borrower defaulting are considerably higher for long term loans.

Cashco Financial is a lending company that serves people across Canada. They provide safe and rapid solutions for your financial needs, by offering a wide range of loan products to meet the specific requirement of any individual. With their super easy loan application process and quick loan disbursement, Cashco offers firm financial support, customized to your personal financial needs. All you need to do is check out the company’s website www.cashcofinancial.com, apply for a loan, and get quick and easy access to the funds in your account, within 24 hours.