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

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 typically for larger loan amounts which can be repaid in multiple installments over longer period of time.

Interest rates for short-term and long-term loans vary. It's important to understand the different rates and fees associated with each loan type when considering your loan options and financial needs.

What Are Short-Term and Long-Term Loans?

Short-term loans may include weekly payments, and may only take a few weeks or months to fully pay back. Long-term loans normally last at least a few years, and can take as long as 10 years or more to repay.

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 usually cover smaller amounts of money than long-term loans. Long-term loans are better for financing bigger expenses, while short-term loans are more appropriate for accessing smaller amounts of cash quickly.

Approval Process

Short-term loans often have a faster approval process than long-term loans because they cover smaller amounts of money and have less stringent application requirements. Short-term loans may approved on the same day or within a few days.

Interest Rate

Short-term loans may have higher interest rates than long-term loans because they are approved quickly and spread over a shorter repayment

period. If a borrower has a low credit rating, they may also incur a higher interest rate for their loan.


Repayment Schedule

Short-term loans are commonly repaid weekly over the course of weeks. Meanwhile long-term loans are often repaid over the course of several months up to a few a years.

Higher interest rates: Short-term or long-term loans

Generally, if you borrow the same amount of money and look at a loan with a short one-year term and another loan with a long ten-year term, many lenders may assess the longer term loan a lower interest rate. However, a lower interest rate spread out over a longer term can mean that you actually pay more in interest charges.

Consider two loans:

#1: You borrow $2000 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.

#2. You borrow $2000 with a 7% fixed APR that has a 10-year term, with 120 scheduled payments. For the 10-year loan, you would owe over $786 in interest charges.

Even with the lower rate, you can still be charged more with longer-term loans. Add in the uncertainty of your financial ability to repay over 10 years, and you can begin to understand the benefits of using short-term loans, even when interest rates are a bit higher.

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 unexpected:

  • Car or home repairs
  • Medical expenses
  • Utility bills
  • Party expenses

What Is the Right Loan for Me?

It's important to select the loan that best meets your financial needs.

You might choose a short-term loan if you:

  • Need money fast
  • Require a small amount of money for a quick expense
  • Are prepared to repay your loan in a few weeks or months

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

Advance America Provides Short-Term and Medium-Term Loans

Advance America offers a range of short-term and medium-term loans, which you can choose from depending on your desired repayment schedule:

Repay by Next Paycheck

Payday loans provide fast cash in advance of your next paycheck. You don't have to repay the loan until that next paycheck comes through, usually in two or four weeks.

Repay in 30 Days

Lines of credit are convenient solutions for accessing money in case of an emergency. You can withdraw money from the line of credit as needed, up to a designated credit limit. Lines of credit often have monthly minimum payments, just like credit cards, and can be fully paid all at once or spread out over time.

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 withdrawn from your bank account or delivered in cash at your nearest Advance America location.

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.
148+ million
loans issued
900+ stores
and online loans
25+ years
providing loans