How do I decide between a short and long loan

2 min read

Shortest affordableThe rule

Longer = more totalThe cost

Match purposeTerm vs need

The trade-off

A longer term lowers each payment but means paying interest for longer, raising the total repayable. A shorter term costs less overall but demands more each month. See the difference across term lengths with the repayment calculator, comparing total repayable, not just the monthly figure.

How to decide

Pick the shortest term your cash flow can comfortably sustain in a lean month, not just a good one. Also match the term to what you're funding — don't still be repaying a loan after the stock has sold or the equipment is retired. For a short, recurring need, a facility may beat any fixed term.

What it means for you

Credicorp lends to your company, not to you personally, and takes no personal guarantee. See business loans or apply online.

Frequently asked questions

Is a shorter loan term always cheaper?

In total interest, yes — you pay interest for less time. But the higher monthly payment must be affordable. The best term is the shortest one whose repayment your cash flow can comfortably carry through a lean month.

Should the loan term match what I'm buying?

Ideally, yes. Financing a short-lived need over a long term means paying for it long after the benefit is gone. Match the term to the working life of what you're funding.