Short-Term vs. Long-Term Loans: Which Option to Get?

November 04, 2020
Short-Term vs. Long-Term Loans

Are you in a rut and in need of quick cash? Under such circumstances, South Africans typically have two options—a short-term or a long-term loan. Regardless of your reason, whether it’s for a need or a want, you must know the difference between these two types of loans and which one will help your specific situation. 

Short-Term Loan

A short-term loan has a shorter repayment time, and it is often used for emergency cases. One of the most common short-term loans is a payday loan, which is a cash advance on your salary and arrives in your bank account on the next payday. 

In South Africa, you can borrow up to R8,000. What makes payday loans popular is that they have a quick approval rate and only call for minimum requirements. In fact, even people with poor credit can get granted a payday loan. 

Other types of short-term loans are merchant cash advances, lines of credit, online or installment loans, and invoice financing. 

Advantages of short-term loans:

  • Shorter time: Most short-term loans need to be paid within a year, which can help you get rid of the interest as quickly as possible. 
  • Quick funding time: Short-term loans are considered less risky compared to long-term loans, which is why they have quick funding times. This is because the borrower’s ability to repay a loan is less likely to change significantly over a short period, which is why the time it takes for a lender underwriting to process the loan is quicker. 
  • Easier application process: You’ll also find it easier to apply for this type of loan because it has fewer requirements and a shorter waiting time. Some loans only take 24 hours of processing!

Disadvantages of short-term loans: 

  • Smaller amount: Short-term loans will only provide you with smaller amounts of money. For this reason, if you need a larger amount, consider a long-term loan instead. 
  • Higher interest rates: Since the loan is shorter, the interest rates tend to be higher. However, it’s possible to get reasonable interest rates; you just have to do your homework and choose the right lender. 

Long-Term Loan

A long-term loan is credit-based and is usually taken on an extended period. In this case, your credit score and history will play an important role in determining your application’s success. When you have an excellent credit score, your interest rates will be lower. Moreover, you can choose between secured or unsecured loans with this option. 

Secured loans mean that you need collateral, while you don’t need one if you go for an unsecured loan. Some of the most common types of long-term loans are mortgages, home improvement, weddings, and business loans. 

Advantages of long-term loans: 

  • Lower monthly payments: Since your repayment schedule is spread over an extended period, you can expect lower monthly payments. 
  • More competitive interest rates: Interest rates for long-term loans are also more competitive, which means that it’s likely you’ll find reasonable rates.
  • A bigger amount of money: Compared to a short-term loan, a long-term loan will grant you a larger amount of money that can help you buy properties or even start a business. 

Disadvantages of long-term loans: 

  • Long application process: Long-term loans have lengthy application processes that can get complicated. Moreover, you’ll have to deal with plenty of people during the repayment period.
  • Longer time in debt: When you have a long-term loan, you’ll be paying off the debt for a longer period, such as ten years and beyond. 


When choosing between a short-term and a long-term loan, it’s all a matter of your preferences. From the vital pieces of information shared above, you now know more about the advantages and disadvantages of short and long-term loans. 

If you need a quick loan in South Africa, Hoopla Loans can help you out. Apply online today and get an instant lending decision to help you rise above your financial situation!