The Key Differences Between Short- and Long-Term Loans

The three key components of a personal loan program are the length of the term, the amount borrowed, and the total cost owed.   

Recreational vehicles are expensive assets, and you might need additional assistance to make the full purchase. That’s why it might be in your best interest to take out a loan. But not every loan program is created equal. When it comes to financial loan services, two primary options are available—short- and long-term programs.

How are you going to determine which program is the best fit? As veteran financial professionals, we’ll make it easy for you to make that decision.

Financial Loans 101

Short- and long-term loans share many commonalities, but several distinctions exist between the two programs. These are the things you should know when you’re considering taking out a loan for your personal assets:

What Are Short-Term Loans?

Loans sanctioned by banks or financial institutions for 48 months or fewer are considered short-term loans. Since these loans are intended to be paid off sooner, they often come with higher interest rates. They can only be granted by commercial entities and must be used to fulfill a borrower’s immediate capital needs.

These loans are ideal solutions for people who need to pay off a debt quickly. Borrowers don’t need outstanding credit to be eligible for short-term loans, so even if you have a poor credit history, there’s no need to panic. More risk typically is involved with these loan terms, though. Since a lower amount needs to be paid back to the lender in a shorter timespan, you can expect a higher interest rate, which makes the loan more profitable to the lender.

Features and Benefits

Short-term loans provide immediate relief to spenders. You can enjoy these perks:

  • Quick approval process
  • Shorter repayment period
  • Limited paperwork
  • Bad credit acceptance
  • Secured or unsecured lending process
  • Long-term loans

What Are Long-Term Loans?

Any loan sanctioned by a bank or financial institution for more than 48 months can be considered long term. These loans vary on different time scales. Loan periods are adjustable, but borrowers typically participate in one-, five-, 15-, and 20-year programs. Not just anyone can get a long-term loan, however. These loans are only available to those with exceptional credit histories, and are often used to help cope with major purchases such as cars, boats, Rv’s, homes, and tuition payments. So if you’re in the market for a new RV or boat, this is the ideal financing solution.

When you accept a long-term loan, lenders are able to collect collateral in case delinquent payments occur. These grants are determined on the annual income of the borrower. Finally, long-term loans come with a prepayment option, so if you’re able to pay in full before the loan matures, you can avoid any prepayment penalty.

Features and Benefits

A long-term loan provides borrowers with financial stability for longer lengths of time. These are some of the things you’ll be able to take advantage of:

  • Higher loan amount
  • More tax exemptions
  • Lower interest rates
  • A boosted credit score
  • Small installment payments
  • Better interest rates

Contact Finance Solution to Find the Best Option

Whether it’s a boat or RV financing, you can always count on Finance Solution to set you up for success. It doesn’t matter what line of credit you carry, because our team will do whatever it takes for borrowers to secure the loans they need. Whether it’s short- or long-term, Finance Solution will make sure clients have access to the best loans with minimal financial stress.

Contact us to learn all about the terms and conditions of our boat and RV loan service programs.