Short Term or Long Term Home Loans: Know How can we Pick the Best one

The tenure for your home loan determines the interest on the loan and EMI payable. A well-optimized loan period helps manage EMIs and pays a lower interest.

A lender will be happy to grant you a long-term home or short-term loan based on your need. It is the borrowers who must decide on the loan that is best for them.

A long-term home loan is for 30 years. The Equated Monthly Installments (EMIs) are easy to pay as they are lower. But your house property will cost you much more. That is because you are paying interest for a lengthy period.

When you secure a home loan for a short period, the EMIs are much higher, and timely payments difficult. That could affect your credit score and your future borrowing.

How then will you choose the home loan tenure? Continue reading to know your housing loan eligibility.

Short-Term Vs. Long-Term Loans

The main difference between short-term loans and long-term loans are as follows:

  • The tenure of a long-term loan ranges from 5 to 30 years. Short-term loans are for a shorter period, up to 5 years.
  • You can pay loans of lesser amounts faster with short-term loans. Even if the loan amount is higher and the borrower can pay it off within five years, he can avail of a short-term loan. Long-term loans are better for borrowers who do not have the financial capacity to repay the home loan within five years.
  • Short-term loans are available at reduced interest rates. As you clear the loan within a short period, you pay less. But the interest rate is higher on long-term home loans. Also, you repay over a lengthy period.
  • The short-term loan EMI is higher, but for a long-term loan, they are lower. 

How to Pick the Best Home Loan?

To know the suitable tenure for your home loan, consider the following factors:

1. Know your Financial Capabilities

At present, you need to know how much you earn and how much you spend. Calculate the figure you have in hand after meeting all your expenses in a month. 

Once you have derived the figure, check the highest amount you can afford to pay as monthly EMIs. It is always better to choose a short-term loan and pay higher EMIs for a shorter period.

2. Cost of the House

Most of us have a dream to move to our dream house in the desired locality. But if it is way too expensive and your spend more than you will ever make, it could end in disaster. 

Control the overall outgo of interest by opting for an affordable property. You can borrow less, pay less as interest, and close the loan quickly.

3. Save to Pay the Down Payment

True that you have applied for a loan and have received approval. But remember that you will receive only about 75- 90% of the total costs. You will have to pay the rest as a down payment from your pocket. 

Plan for a home loan and pay a higher amount as a down payment for the house property. It will reduce your financial burden.


Which one is better – short-term or long-term home loans? It all depends on the borrower’s housing loan eligibility. If you have the financial ability to repay within a short period, you can choose a short-term home loan. But if it is difficult for you to pay back within five years, you can opt for a long-term loan provided your age permits the tenure. At the end of the day, all you need to ensure is that you do enough research to take an informed decision on the matter.

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