A short-term loan or a long-term loan often refers to the time period by which a loan is required to be paid back. A short term loan is generally required to be repaid within a few months to around a year.
A long-term loan repayment, on the other hand, may last for a few years to several years, for example, 10-15 years. A short-term loan is typically associated with an individual’s need for money quickly and in a relatively small amount.
Examples of short-term loans include cash advance loans and loans derived from peer-to-peer lending. A long-term loan is typically required for a larger amount of money or for a loan involving larger transactions, for example, home purchase loans.
Certain loans may be short-term or long-term or may fall somewhere in between. An example of this would be a car loan, which may be a large amount or a small amount, depending on the price of the vehicle.
What Are Some Common Types of Bank Loans?
A bank loan is a type of loan which is issued from a bank to a private borrower. These types of loans may involve a wide range of different types depending upon the institution that is involved.
Larger bank institutions may offer a range of loan products for numerous different uses. Common types of bank loans may include:
- Home-improvement loans and other related loans;
- Student loans;
- Car loans;
- Personal loans; and
- Small business loans.
Depending upon the bank, a loan may be presented as a general package which is the same for each potential client. Some banks, on the other hand, may enter into a specialized contract or agreement with each individual borrower in order to help reflect their individual needs and interests.
What is a Cash Advance Loan?
Cash advance loans are short-term loans with high interest which can be obtained in exchange for a post-dated check, typically within a week or two weeks from the date the check is actually issued, from the consumer. The amount of the check will include the amount of the case advance in addition to any additional charges and interest.
The lender will not cash the check until the date which is written on the check. The consumer, at any time, can decide whether to let the lender cash the check or to renew their loan by only paying the service change.
This type of arrangement may be referred to by many different names, including:
- Cash advance loans;
- Payday loans;
- Check advance loans;
- Postdated check loans;
- Delayed deposit checks; and
- Deferred deposit checks.
Is a Cash Advance Loan Considered a Loan?
Even though many cash advance lenders attempt to make individuals believe that they are simply cashing checks for a service fee, cash advance loans are indeed loans of money. This is important to be aware of because proper loans provide consumers with greater levels of protection, including the right to be informed of certain disclosures as provided in the Truth in Lending Act.
It is important for consumers to be aware of the risks which are involved with these types of loans because the interest rates can be extremely high. Interest rates may be difficult to understand with these types of loans because they are usually described and included in the service fees.
How Are Short-Term and Long-Term Loans Different?
As noted above, one of the main differences between short-term loans and long-term loans is the amount which is issued. The general rule is that the higher the loan amount, the longer it will take to repay the loan, although there may be some exceptions.
Another difference between the two is that it can be easier to obtain loan approval for a short-term loan. A short-term lender may not require as stringent of a background credit check as a long-term lender.
For example, a mortgage loan may be associated with a very thorough and, in some cases, demanding risk analysis process prior to a loan being approved. In contrast, a short-term loan can often be obtained on the spot.
Short-term loans typically have higher and less flexible interest rate options. This is to compensate for the shorter repayment period and to help prevent borrower default because it is common for a short-term borrower to have a bad credit rating.
How Are They Similar?
Short-term loans and long-term loans are similar in that the lenders are required to abide by all federal and state loan requirements and are also required to obtain proper licensing or certification. Regardless of how long a pay term will last, the majority of loans present a borrower with the option of either paying the loan back in a lump sum or paying in periodic payments.
The majority of borrowers opt to repay loans in periodic payments so that they can spread out their finances on a weekly or monthly basis. Both types of loans may be susceptible to similar legal issues, including:
- Loan fraud;
- Defaults; and
- Criminal violations, for example, tax-evasion issues.
In some cases, these issues may require legal action in order to fully resolve the conflict.
What Are Some Common Types of Bank Loan Disputes?
Disputes related to bank loans may come in several forms, including:
- Issues with underwriting and loan approval;
- Non-payment, or default;
- Loan fraud;
- Breach of contract;
- Issues with a loan modification; and
- Misrepresentation of loan information or borrower or lender information.
For example, non-payment is a common issue with certain types of mortgage loans. A borrower’s situation may change which may cause them to miss payments, which can also lead to other disputes and consequences.
Are There Any Legal Remedies for Disputes Over Bank Loans?
The legal remedies for disputes involving bank loans will depend on the type of dispute which occurs. If the bank is at fault, remedies may include:
- Damages for losses caused by a violation;
- Revocation of professional license, especially in cases involving fraud; and
- Re-writing or re-negotiating of the loan terms to correct an error.
In situations where a borrower is at fault, the remedies may include a damages award in favor of the bank or having a lien placed on the borrower’s property. When there is a lien, the bank may, in some cases, obtain title to the borrower’s property in lieu of payment for the default.
What Legal Problems Exist with Cash Advance Loans?
There are numerous legal issues which may arise related to cash advance loans. One of the most common is when a consumer is surprised by the extremely high charges when they renew their cash advance loan. For example, a 15% service fee per week amounts to the same as a 600% interest rate over a year.
Most consumers believe it is highly unfair to pay such rates, especially if they were not informed of the charges. Another legal issue which may arise is when a check bounces when the lender attempts to cash it.
If this occurs, a lender will often allege check fraud and file a claim against the consumer in civil court. In civil court, the punishment may be up to 3 times of the original amount of the check. For a consumer, this can make a cash advance loan extremely expensive.
Do I Need a Lawyer for Help with a Loan Issue?
A short-term or a long-term loan may be helpful if you are trying to reach a particular financial goal. It can also be helpful to consult with a credit lawyer prior to obtaining a loan of any type.
Your lawyer can advise you regarding the different options, what laws apply to each, and which type of loan may best fit your needs. If a dispute arises regarding your loan, your lawyer can represent you during those court proceedings.