Short vs Long term personal loans: how to choose the right one?

5 MinsFeb 2, 2023

Personal loans are a great way to cover emergency expenses. There are many options for getting a suitable loan tenure. These unsecured loans come with flexible tenures.

Short vs long personal loan terms: how to choose the right one?

Let us look at whether a long-term or short-term personal loan makes more sense.

Short vs long-term personal loans:

Pros of short-term personal loans:

  • Interest costs on short-term Personal Loans are lower as you can pay them quickly.
  • If you want to pay off the credit as soon as possible, a short-term personal loan will certainly assist you in doing so.
  • If you don’t need a large amount of cash, a short-term loan can help you avoid borrowing extra cash than you need.

Cons of short-term personal loans:

  • Since the tenure is short, short-term personal loans are accompanied by high monthly instalment amounts.
  • A short-term personal loan can’t give long-term financial help and is only meant to handle current cash flow concerns.

Pros of long-term personal loans:

  • With long-term loans, it’s usually easier to secure significantly bigger loan amounts than you can receive with short-term loans.
  • A long-term loan's monthly instalment will be relatively small and much more manageable than a short-term personal loan's monthly repayment amount. This is mainly because repayment is expanded over several months or years.
  • Making all of your long-term personal loan instalments on time might help you boost your credit rating. A long-term loan allows you to make steady payments over a prolonged period.

Cons of long-term personal loans:

  • If you're having trouble making loan repayments, a long-term loan might add a load of financial burden to your platter for several years.
  • Since the loan repayment is spread out over several years, the interest amount that you need to pay is considerably high.

How to decide on a loan term?

Evaluating your spending and savings rates can help you ascertain the correct personal loan term and EMI amount. Create a list of your monthly obligations and how much you can save before taking out the loan. Assess whether you have any outstanding debts and how long they will last. You can choose your EMI amount and loan term based on your savings and spending habits.

The amount you desire to borrow via personal loan has a great influence on deciding the loan term. For low loan amounts, such as 2-3 times your monthly salary, a short loan term is preferable, as a longer term increases your interest payment.

While planning your personal loan instalment amount, you can consider any due salary increments set in the near term. Therefore, you can choose a larger EMI amount and shorten your loan term. Paying off higher EMIs will be difficult at first, but your overall interest outgo would be lower in the longer run.

[Also Read: How To Choose The Best Personal Loan Lender]

Axis Bank personal loan EMI calculator

Axis Bank's personal loan online EMI calculator is a useful online tool for calculating your EMI. It is really simple to operate. All you have to do is input the loan amount, interest rate and loan term. This online calculator will present you with your monthly instalment amount within a second. This is useful when planning for a personal loan tenure.


There is no right or wrong choice when it comes to choosing a loan tenure. Some situations will necessitate a long-term personal loan, while others will favour short-term loans. Just be sure to choose the right tenure for your personal needs.

Still unsure about eligibility? Check the personal loan eligibility criteria at Axis Bank's intuitive website. 

Want to calculate the monthly EMI on a personal loan? Check out Axis Bank's interactive personal loan EMI calculator & interest rates on personal loan

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.