Comparing Interest Rates: Short-Term vs. Long-Term Loans

Both short-term and long-term loans can help you get money for important expenses. Short-term loans are an option for accessing quick cash or covering an unexpected financial expense, while long-term loans are for larger loan amounts that you can repay in multiple installments over a longer period of time.

It's important to understand the different rates and fees associated with short-term and long-term loans so that you can choose the right one for your needs.

What are short-term and long-term loans?

From the dollar amounts to the repayment terms, there are several differences between short and long-term loans.

Short-term loans may come with weekly payment terms and take only a few weeks or months to repay.

Long-term loans, on the other hand, usually require monthly payments and can take as long as ten years or more to repay. In the case of mortgages, the largest type of loan, you can expect to make payments for up to 30 years.

Short-term vs. long-term loans

Here's a breakdown of the differences between short-term and long-term loans:



Short-Term Loans


Long-Term Loans


Loan Amount






Approval Process


Instant - 24 hours


Weeks or months


Interest Rate


Higher APR rates


Lower APR rates


Repayment Schedule


Weekly or monthly (based on pay frequency) over weeks or months


Monthly over several months or a couple of years


Loan amount

Short-term loans are usually smaller than long-term loans, making them better for small, immediate needs. Conversely, long-term loans are better for financing bigger expenses, such as college tuition, a vehicle, or a new home.

Approval process

Short-term loans are considered lower risk than long-term loans, making it easier to receive approval.

Additionally, because they're for a lower dollar amount, short-term loans often have a faster approval process than long-term loans. You can even get same-day approval for certain types of short-term loans from Advance America!

Interest rate

Short-term loans may have higher interest rates than long-term loans because they are approved quickly, have a shorter repayment period, and have less strict credit requirements.

Because of their easy approval process, short-term loans are more readily available to borrowers with bad credit. This also contributes to their higher interest rates since the lender is taking on more risk.

Repayment schedule

Short-term loans are often repaid via weekly or monthly installments over the course of a few weeks or months. In the case of Payday Loans, a common type of short-term loan, you’ll repay the full amount at once in a single payment.

Long-term loans, on the other hand, are mean to be repaid over the course of several months, years, or even decades.

Short-term vs. long-term interest rates: Which loan is lower?

In general, short-term loans will have higher interest rates than long-term loans. However, even though long-term loans have lower interest rates, those payments are spread out over a longer period. This typically results in paying more interest overall, even though your interest rates are lower.

Consider the following scenarios:

Loan #1: You borrow $2,000 with a 10% fixed APR that has a 2-year term, with 24 scheduled payments. Over the life of the 2-year loan, you would pay $214 in interest charges.

Loan #2: You borrow $2,000 with a 7% fixed APR that has a 10-year term, with 120 scheduled payments. For the 10-year loan, you would pay over $786 in interest charges.

Even with the lower rate, you will pay more in total interest with a long-term loan than with a short-term one. You should also factor in the uncertainty of your financial ability to make steady payments over ten years. When you consider total savings and financial stability, short-term loans can be preferable to long-term ones in certain circumstances.

Short-term loans: Built for emergency expenses

Short-term loans can help get you out of a financial bind. Potential uses for short-term loans include:

  • Car or home repairs
  • Medical expenses
  • Utility bills
  • Event expenses
  • Funeral costs
  • Wedding or honeymoon deposits

Long-term loans: Intended for ongoing expenses

Long-term loans are generally better suited for large, ongoing expenses, such as:

  • College tuition
  • Financing a new home or commercial property
  • Paying for a vehicle or RV
  • Debt consolidation

What is the right loan for me?

Choosing a loan that doesn’t fit your needs could put you into a bigger financial bind than you're currently in.

You might choose a short-term loan if you:

  • Need money fast.
  • Prefer an easy approval process.
  • Require a small amount of money for a quick expense.
  • Are prepared to repay your loan in a few weeks or months.
  • Don't have a great credit score.
  • Want to pay less interest overall.

You might choose a long-term loan if you:

  • Can wait a few weeks for approval.
  • Need a larger amount of money for a big expense or project.
  • Want to repay your loan over a few months or years.
  • Prefer lower monthly payments.
  • Want a lower interest rate.

Advance America provides short-term loans

At Advance America, we offer a range of short-term loans, which you can choose from depending on your desired repayment schedule:

Repay by your next paycheck

Our Payday Loans are designed to provide you with a fast infusion of money in advance of your next paycheck. You’ll repay the loan when your next paycheck comes through, usually in two to four weeks. Payday Loans are small-dollar loans with a fast and easy approval process that doesn't require a credit check.

Repay in 30 days

Opening a Line of Credit can be a convenient solution for accessing a source of funds in case of an emergency. You can withdraw money from your Line of Credit as needed, up to a designated credit limit. Lines of Credit often have monthly minimum payments and can be fully paid all at once or spread out over time.

You can leave your personal credit line open for as long as necessary, ensuring you have ongoing access to funds when expenses arise.

Repay in 3-24 months

Installment Loans provide instant access to money that you can repay in multiple installments over time, ranging from 3 to 24 months. Payments can be automatically deposited to your bank account or delivered in cash at your nearest Advance America location.

Installment Loans are ideal if you need a larger amount of money than you can get with a Payday Loan. They typically also have lower interest rates since payments can be spread out over a longer period of time.

Get the right loan for your needs at Advance America

If a Line of Credit, Payday Loan, or Installment Loan sounds like the right loan for you, consider choosing Advance America as your lender. We offer competitive interest rates, favorable repayment terms, and same-day approval with each of these loans.

You can apply for your loan online or in person at your nearest Advance America store. If you apply before 10:30 AM EST, you could even receive same-day funding via direct deposit or cash.

Submit your application today!

About the Author

Jalin Coblentz has contributed to Advance America since 2023. His experiences as a parent, full-time traveler, and skilled tradesman give him fresh insight into every personal finance topic he explores.

The Advance America advantage

Since 1997, Advance America has helped millions of hardworking people with a variety of financial solutions including Payday Loans, Online Loans, Installment Loans, Title Loans and Personal Lines of Credit.
157+ million
loans issued
800+ stores
and online loans
25+ years
providing loans