When should I use the short or long term credit? It all depends on what you buy.
When you have decided to pay for a product in installments, you must then make the determination whether you will pay for it in the short or long term. Using the interest-free months on your credit card may be the solution to buy something that cash could not be otherwise. Even if it is not months without interest, many times you can only purchase the item in installments. So, should I pay it in the short or long term?
Generally speaking, short-term credit lasts less than one year, and long-term credit lasts more than one year. When we want to buy a high value item and we can pay it in installments, then we must decide what term we will choose. It can be short or long term.
The decision between short or long term credit
To make the determination, the first step you should take is to see how much you would have to pay monthly if you choose the short or long term taking into account the interest rate (in case you are not buying months without interest).
Remember that in a shorter term, the interest rate will be lower. If on the contrary, you go for the long term, then the interest rate will be higher.
How much you are going to pay approximately
Once you know how much you are going to pay approximately, if you choose one term or another, then check your budget. It is very important that you know what your income is and what your expenses are, so you can know what your borrowing capacity is. This will allow you to make the decision: short or long term.
Make accounts over and over again. Since you saw what your budget is and you have determined what credit you should take, then check your financial situation again. For what? To check if in any budget item you can cut expenses and choose the short-term credit. If you choose a short-term loan you will finish paying before and get rid of the debt before. On the other hand, in the long term, although you will pay less each month, the debt can become eternal and annoying.
Now, there will be credits that will necessarily be long-term, such as buying a car or a home. In this case, the term will be long, but what you can choose is how long it will be: 15 years, 20 years, 30 years … When deciding on a loan choose the most attractive rate. The rate can be variable or fixed, it will depend on what suits you.
Use a short or long-term credit when the price of the good or product
When you decide on a credit, regardless of the term, always check the CAT (Total Annual Cost), which contains the information of the interest rates, as well as all the expenses that are made in the credit (opening fee, insurance, annual commission, interest, etc.). Compare and decide for the loan with the lowest CAT.
Use a short or long-term credit when the price of the good or product you are buying is too high and you cannot pay it from chas-chas. It is at that time that it is convenient to buy on credit. The decision of whether in the short or long term will depend on your pocket.