Short Term vs. Long Term Loans

Woman giving money to a man

If you need to take out a loan, you may be feeling unsure about whether a short term or long term loan is the right option for your needs and financial situation. At their simplest definitions, a short term loan is a loan that is repaid within one year, while a long term loan can be paid off over an extended period of time. Of course, there’s more to know about each option before moving forward, including their respective pros and cons. To learn more, join Xpress Cash as we compare short term vs. long term loans, below.

What is a Short Term Loan?

A short term loan is borrowed money that must be repaid by a specific date – usually, within six months to one year. Most often, short term loans are utilized for personal needs that require a smaller amount of money, like home repairs, medical expenses, or even vacations. They’re also a popular option for small businesses that are just starting out and may not be able to secure a line of credit with a bank.

Some common types of short term loans include:

  • Cash advance
  • Payday loan
  • Installment loan
  • Invoice financing loan

Short Term Loans: Pros and Cons

If a short term loan sounds like it might be right for you, there are some pros and cons you should consider before moving forward:


  • Less Interest Paid: Because short term loans need to be repaid in such a short amount of time, you’ll pay less total interest when all is said and done. Short term loans also tend to use simple interest, meaning you are only paying interest on the total loan amount.
  • Fast Funding: On the lender’s side, short term loans are less risky and require less background work. So, the borrower can get their funds faster than they might with a long term loan.
  • Ease of Access: Do you have a credit score that’s not so great? Many individuals in this situation find that the requirements for short term loans are easier to meet, increasing your chances of approval.


  • Smaller Borrowing Amounts: Short term loans offer smaller borrowing amounts than long term loans.
  • Expensive: Because they need to be paid off within one year, short term loans tend to come with a higher monthly payment.

What is a Long Term Loan?

A long term loan is borrowed money to be repaid within two years or more. Long term loans are reserved for individuals or businesses who need to borrow a larger sum of money – usually $25,000 or more. Some common types of long term loans include:

Long Term Loans: Pros and Cons

As with short term loans, there are pros and cons that come with long term loans. Before taking any action, consider the following:


  • Larger Borrowing Amounts: If you need funding for a significant expense, long term loans allow you to borrow a larger sum of money.
  • Good Interest Rates: Long term loans tend to require a good credit score, which usually means a better interest rate.
  • Lower Monthly Payments: Because you’ll have a longer period to pay off the loan, long term loans will usually come with a lower monthly payment that feels easier to manage.
  • More Lender Options: You’ll have a greater variety of lender options for long term loans, allowing you to compare offers and ensure you get a loan you feel confident about.


  • Borrowing Costs: Your overall borrowing costs may be higher with long term loans.
  • Lower Approval Rate: Long term loans have stricter requirements and usually need a good credit score, so it may be harder to get approved.

Learn More About Long Term Loans vs. Short Term at Xpress Cash

Have lingering questions about whether a long term loan vs. short term is right for you? The friendly faces at Xpress Cash are here to help! Contact us or stop by to see us at one of our Michigan locations to learn more today. While you’re here, we can tell you more about our own short term loan options.

Do you have plans to repay your loan early? Before moving ahead, there are a few factors you should consider – explore them in-depth with our team.