In what situation do you need a short-term loan, and in which a long-term one? What do you need to know before issuing a debt obligation? Why is it still worth choosing an online payday loan? When there is a need for money, then a payday credit will save you from a lack of money outside of work. There may be several ways to solve this need as you can get both short-term and long-term loans from non-bank lenders.
Short-term loans (including online payday loans) will differ not only in terms of repayment. They also differ in other important factors that must be taken into account when assessing what exactly you need. In this article and also at Moneyzap.com, you will find useful information and get advice from experts on choosing the type of payday online credit that is most suitable for you. You will know which factors can influence the choice of the form of credit when you plan to take a payday loan online.
How does a Short-Term Loan Differ from a Long-Term One?
The main difference between short-term and long-term loans is the repayment period. Short-term loans are issued for a short period (this can be only one month for a payday loan), in turn, the repayment period of a long-term loan can range from several months to several years (including the payday loan you most often choose).
In addition, the amount of short-term loans is relatively small. In most cases, it is no more than a couple of hundred euros. Moreover, the interest rate on short-term credit is higher than in the case of long-term loans (given payday loans from online lenders). Long-term loans are offered not only by banks but also by many non-bank credit institutions. Such credit type is issued for longer periods. Often the loan amount is several thousand euros.
A long-term loan is often defined as debt with a maturity of more than 12 months. Due to the large amounts and the longer repayment period (which means longer commitments on your purchased payday credit online) lenders are more careful in assessing the applicant’s compliance with the conditions for successfully repaying the amount issued. There are times when a long-term loan is issued as collateral.
How to Determine which Loan Type is More Suitable in a Specific Situation?
Once in a situation where you need quick cash, that is, a payday loan online, any borrower would like to choose the most suitable type of lending. Before deciding to take a payday loan online weigh all the factors that determine the differences between loans and your needs.
Factors that should be considered if your goal is to take a short-term payday loan:
Purpose of the Credit
Like any credit type, an online payday loan is always issued with a specific purpose. It will help you understand which type of lending is most appropriate for a specific situation. For some long-term loans, the purpose of their use becomes clear from their very name (car loan, mortgage loan, student loan). However, consumer loans and payday loans online may have different purposes.
A short-term loan is a type of loan that is usually chosen when it is necessary to urgently resolve a situation that has arisen. For example, you need to pay for medical services, repair a car or household appliances, or urgently cover other financial obligations. In turn, a long-term loan is usually used to implement larger plans, for example, to buy a car, home furnishings, or to pay for home improvement work. In this case, a payday loan with a long term should also be considered.
Required Amount of Money
The choice of the form of lending is greatly influenced by the size of the required amount. If you need a larger amount of money, then choose a long-term credit. But if the amount is not large and you need it as soon as possible, then, a short-term loan will be the most suitable solution (especially when it comes to the choice of payday loan online).
It is important to assess not only the amount of the loan itself but also its total cost. Short-term loans compared to long-term ones usually have higher interest rates. For example, if the purpose of the loan allows you to choose a long-term loan, and you qualify as a recipient of such a loan, then in most cases this form of lending will be the best choice. Therefore, the total cost of the loan will be lower than your payday lending type online.
Monthly Payment Amount
The repayment period of a long-term credit can be very long. When applying for a short-term loan in the next month after receiving the money, you will have to start paying both the loan itself and the interest on it. Everyone must assess their own capabilities. Still, with a short-term loan, the risk will be higher since, with the help of such a loan, unplanned financial expenses are most often extinguished. Such a loan could not be paid from the funds available in a particular month. An applicant taking into account a payday loan online must very carefully assess whether it will be possible to repay the debt in the coming months.
Payday Loan Requirements
In the case of a long-term loan (and depending on the size of the amount), the credit institution may ask the potential client for additional security of the loan. But in any case, the recipient of the loan must meet the requirements set by the lending institution. The lender will be interested in the credit history of the loan recipient, solvency, as well as other factors that are important for the lender. In turn, short-term loans are usually issued without collateral or surety. In this case, it is especially important to assess your own ability to repay your payday loan on time.
If you need a long-term loan, then you can get a consumer loan from the list of services offered by a financial company. If you are considering the possibility of refinancing an existing credit or consolidating several loans, then you will also find refinancing and consolidation of the debt. Some of the credit institutions offer recrediting services for amounts from 100 to 10,000 euros with a term of up to 84 months.