A short-term personal loan can be an easy way to get the money that you need without having to pay a lot in interest and other charges. These short-term loans are often advised over long term loans for this reason, though there are a number of things that you should keep in mind before deciding to apply for this type of loan. To make sure that a short-term personal loan is right for you and your financial needs, stop to consider some of the following factors that might affect the money that you borrow.

Loan Term

The term of a loan refers to the time that an individual has to repay the money that they borrow with a loan. A loan is usually described as short term if the debt lasts for a less than a year, whereas anything that is borrowed for over a year is considered to be a long-term loan.

A long term loan may be borrowed for up to 25 years or more, of for as little as 2 years. The total loan cost is determined by the exact duration of a loan, which is why short-term personal loans are ideal for a number of purposes. The shorter the term of the loan is, the less time there is for interest to build up and add to the total cost of the loan.

Total Loan Cost

Determining the total loan cost is a matter of applying basic math skills to the money that you borrow. Your loan has an annual interest rate, given in a percentage that is multiplied by the loan term. The shorter your loan term is, the smaller the total amount of your debt will be.

Each month you'll have pay interest on your personal loan, and the longer you have your loan then the more interest you'll end up paying. Lenders may lower the interest rate on long-term loans to offset this, but often a long-term personal loan will still be much more costly in terms of interest charged than a short-term personal loan.

Early Repayment Fees

Some loans may charge early repayment fees. Even though it may seem like paying off as much debt as possible would be a good idea, if you're not careful then you may end up paying more than you expected. Some lending companies add a charge like this to their loans as a way to make as much money off of what they let you borrow as possible. This extra charge is usually called an early repayment fee, and is equal to the interest of two or three months.

Early repayment fees should be avoided if possible with all loans, and by taking out a short-term personal loan you can avoid the extra cost of long-term loans while making your payments manageable enough that you can simply pay off the loan in the exact time specified if additional fees are present.

Deciding on the Best Loan Term

The main marketing point of a long-term loan is the affordable interest rate. Because it's a longer loan the rate may look lower, but it's important that you keep in mind the fact that you're going to be paying that interest rate for a lot longer than you would be for a short-term personal loan. Take the time to balance the loan term with the amount that you borrow, and calculate how much you'll be paying in interest with your various options to determine exactly how long of a loan term is best for you.

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