Compare short-term and long-term business loans to choose the right repayment term for your needs.
Short-term vs long-term loans: Short-term loans (3-18 months) offer faster approval, higher monthly payments, higher rates (10-50% APR), and pay off quickly. Long-term loans (2-10+ years) offer lower monthly payments, lower rates (5-15% APR), longer approval, and pay off slowly. Best for short-term: Quick needs, can afford higher payments, want to pay off fast. Best for long-term: Large purchases, need lower payments, want to spread cost over time.
| Factor | Short-Term Loans | Long-Term Loans |
|---|---|---|
| Loan Terms | 3-18 months | 2-10+ years |
| Interest Rates | 10-50% APR (higher) | 5-15% APR (lower) |
| Monthly Payments | Higher (shorter term) | Lower (longer term) |
| Total Interest | Lower (pay off faster) | Higher (pay longer) |
| Approval Time | 24-72 hours (faster) | 1-4 weeks (slower) |
| Credit Requirements | 500-600+ (more flexible) | 680-700+ (stricter) |
| Best For | Quick needs, cash flow gaps | Large purchases, equipment |
Loans with repayment terms of 3-18 months. Designed for quick funding needs and fast repayment. Higher monthly payments but pay off quickly.
Loans with repayment terms of 2-10+ years. Designed for large purchases and spreading cost over time. Lower monthly payments but pay interest longer.
Scenario: Borrow $100,000
Trade-off: Short-term saves $11,664 in interest but requires $7,140 more per month. Long-term costs more but payments are $7,140 lower monthly.
Short-term loans typically cost less in total interest due to shorter term, despite higher rates. However, long-term loans have lower monthly payments, making them more affordable for cash flow.
Yes, most lenders allow early payoff. Some charge prepayment penalties (check terms). Paying off early saves interest but requires cash available.
Short-term loans typically easier to qualify for (500-600+ credit). Long-term loans require stronger credit (680-700+) and more documentation.
Yes, can refinance to longer term if you qualify. Lowers monthly payments but extends repayment period and may increase total interest.
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