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Difference Between Short Term And Long Term Home Loan

Housing Finance Know More 19-09-2022 | 5 mins read

Planning to buy a dream home is indeed a big move and perhaps something almost everyone aspires to. But, unless one has a lot of money saved, all you need is the right home loan to fund the purchase. To sanction a home loan, banks and financial institutions take into account certain eligibility criteria such as the financial condition and age of the borrower, loan tenure & amount, and the borrower’s credit score. The recent decline in interest rates, availability of many loan options to choose from and hassle-free home loan processing has made it possible to turn this distant dream of many Indians into a reality. Although there are ample lenders providing housing finance in the market, before applying for a loan, one must carry out detailed research to find the best option that suits one’s need.

Types of Home Loans

Financial institutions and banks usually provide two types of home loans:

  • Short-term
  • Long-term

Short-term Home Loan

Long-term loans are loans that are repaid over a long duration. The loan period varies from over a year to up to even 30 years. These loans are characterized by high loan amounts and lower interest charges. The key benefits of long-term loans are:

  • The ability to borrow a significant amount
  • Lower interest rates charged on loans
  • Affordable repayment schedules

The demerits of these loans are that the borrower makes an overpayment of amounts that could otherwise be saved due to the long repayment tenure.

Comparison Table:

Short-term Home Loan vs. Long-term Home Loan.


There is no thumb rule as to which loan is the best – it all depends on what the needs are. Both these home loans (short-term and long-term) have their pros and cons and are meant to serve specific needs. To opt for a short-term or a long-term home loan depends entirely on the borrower’s repayment capacity. When a borrower considers which type of home loan to opt for, the things that matter are: (1) the loan amount required (2) how fast the loan is needed, and (3) the financial strength and ability of the borrower to pay back the loan. 

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