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Short-term vs. long-term loan: What’s the difference?

Find out how short- and long-term loans differ from one another, and learn more about the benefits of each.

Girl looking at ClearScore app for loan options

Browse short- and long-term loans

All the offers you see on ClearScore are tailored to your credit score and financial circumstances.

See if I qualify

A loan can help you when you need extra financial support. Perhaps you had an unforeseen expense, or maybe you want to grow your business and need extra capital to do so. Either way, you should find a loan that is right for your circumstances.

A short-term loan can help you when you’re in a pinch. If you need to cover unexpected bills, such as an unplanned visit to your doctor or emergency car repairs, a short-term loan might be the right option for you.

Traditionally, long-term loans are taken out for larger financial responsibilities. As the name may suggest, they are paid off over a longer period, whereas a short-term loan is repaid quickly – within a few weeks or months.

Here’s a closer look at the benefits of each type of loan.

1. You don’t need collateral

It doesn’t have to be tied to an asset, such as a house or car.

2. There's no long-term commitment

Lenders aim to have it settled quickly – usually within three months.

3. You immediately gain access to cash

Funds will usually enter your account within 24 to 48 hours.

1. Access to larger amounts of money

You can usually borrow more with a long-term loan than a short-term loan.

2. Lower interest rates

Since the loan amount is spread out, the rates are usually lower than for short-term loans.

3. Longer repayment period

You have more time to pay the loan back and this may be easier to manage.

On ClearScore, we offer both short-term and long-term loans from leading partners around South Africa. We’ll match you with offers you’re most likely to be approved for, based on your credit report and account information.


Isabelle is a freelance finance writer and journalist in Cape Town. She helps make managing your personal finances calm, clear and easy to understand.