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The long and short of personal loans

Learn the differences between short-term and long-term personal loans to make an informed decision.

Personal loans constituted 96 % of new bank loans taken in FY 2018, according to RBI data. This staggering figure can be attributed to the fact that personal loans can be availed within an hour and have an easy eligibility criteria. When it comes to using them to your advantage, keep in mind that personal loans come in all forms. For example you get short-term loans that have tenures ranging from a few months to a couple of years, and long-term loans that have tenure of three years or more.

In terms of the loan tenure, both short- and long-term personal loans come with their own set of benefits. While long-term personal loans help build your credit score and ensure your EMIs are affordable; taking a short-term personal loan means that you will need to pay less in terms of overall interest.

Here are a few pointers to keep in mind while choosing the right personal loan for your needs.

Short-term personal loans do not require collateral

Short-term loans pose less of a threat to lenders in terms of repayment. As such, your lender may ask you to pledge security to obtain a loan for a lengthy tenure but not for short tenure. The security may take the form of gold, an investment or any other valuable asset. Nevertheless, you can get collateral-free financing for tenure of up to five years when you opt for the Bajaj Finserv Personal Loan.

Long-term personal loans help meet important financial commitments

You can use a long-term goal to fund your child’s overseas education programme, take care of a medical expense or finance a wedding, with ease. You can also use this loan to fund your dream vacation, or to renovate your home and update it with the latest conveniences and décor.

Short-term personal loans can give you a better interest rate

Lenders evaluate your financial profile before offering loans. Since the status of your finances is not expected to change in the imminent future, you tend to get lower personal loan interest rates on short-term loans.

Long-term personal loans help you reduce your EMI amounts

Long tenures help you space out your instalments over a greater number of months, thereby reducing the value of each one individually. You can split up large and small personal loans alike, over many years, and bring down the monthly cost of your loan. Use an EMI calculator to compute your instalments and remember to choose the shortest tenure you can manage. As this ensures you do not pay extra interest in the long run.

Short-term personal loans get disbursed more quickly

Lenders normally examine your credit score, monthly income and debt-to-income ratio before approving your loan application. While these terms may be same for both short and long-term personal loans, short-term loans are often approved and disbursed quickly. However, the advantage of using Bajaj Finserv is that you get both short-and long-term loans approved speedily and disbursed within 24 hours.

Long-term personal loans are better for your credit score

Your credit score is built over time. By repaying a loan over a lengthy tenure you show diligence, financial discipline, and good money management. Since 30% of your score evaluates your credit history and 25% judges the type and duration of credit you have borrowed; a long-term loan can boost your score.

Short-term personal loans are more accessible

You can get a short-term personal loan that ranges up to INR 2 lakh with a tenure spanning from 1 day to 3 years, easily online. Bajaj Finserv gives you access to both short and long-term personal loans up to INR 25 lakh through its personal loan app.

Selecting the right lender is the first step towards finding the perfect match for your financial needs. For example, with Bajaj Finserv you get a flexible 12 to 60-month tenure that allows you to get both short and long-term loans at one place. Further, this lender offers you small personal loans up to INR 10 lakh, and large loan amounts up to INR 25 lakh, sans collateral as well.

To get a personal loan that’s tailored to your current finances, all you need to do is check your pre-approved offer from Bajaj Finserv. Doing so gives you instant approval through a customised deal and is a convenient way to get funds.

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