How long is the term of a short term loan?

Specifically, according to Article 10 of Circular 39/2016/TT-NHNN, credit institutions and foreign bank branches have 3 types of loans as follows:

- Short-term loans are loans with a maximum loan term of 1 year.

- Medium-term loans are loans with a loan term of over 1 year and a maximum of 5 years.

- Long-term loans are loans with a loan term of over 5 years.

Thus, the term of a short-term loan is 1 year or less.

Which borrowing needs are short-term loans suitable for?

A short-term loan is a type of loan that is usually for a period of less than one year. It is suitable for a variety of financial purposes, especially urgent or temporary needs. Here are some situations where a short-term loan may be suitable:

- Urgent consumer needs: Life inevitably has unexpected situations such as home repairs, vehicle repairs, or paying medical bills. Short-term loans help you quickly solve these expenses without having to worry about accumulating cash over a long period of time.

- Short-term business: For businesses, especially small businesses, short-term loans can help solve temporary capital needs such as purchasing raw materials, paying employees, or maintaining production activities in the short term. These loans help businesses maintain stable operations without facing financial difficulties.

- Temporary investment: Short-term loans are also suitable for investors who need capital to make short-term investments. For example, you can take out a short-term loan to buy stocks, bonds, or other assets in the hope of making a profit in a short period of time. Once you make a profit, you can repay the loan and continue investing.

- Spending on special events: Sometimes you want to organize a family vacation or a special event but do not have enough finance. A short-term loan is a reasonable solution for you to fulfill this desire without having to wait too long. You can borrow short-term and pay it back gradually after the event ends.

- Tuition and study costs: For students or working people who want to improve their qualifications, short-term loans can help you cover tuition and other study costs. This gives you the opportunity to study without having to worry about finances in the long run.

In conclusion, short-term loans are an ideal option for many urgent or temporary financial needs. However, you need to carefully consider your ability to repay the loan and the interest rate to avoid financial difficulties in the future. Before deciding to borrow, you must carefully understand the terms and conditions of the loan to ensure that you are choosing the most suitable financial solution for you.

Cong Hieu (synthesis)

Source: https://vtcnews.vn/thoi-han-cua-khoan-vay-ngan-han-la-bao-lau-ar905666.html