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 medium-term loan is from over 1 year to 5 years.
Illustration: Business Finance Magazine.
Advantages and disadvantages of loans
Short term loan
Advantages: Short-term loans are usually for less than a year. This allows you to pay off your debt quickly and not worry about long-term debt. Banks and financial institutions usually process short-term loans faster, so you can get your money quickly. Because of the short loan term, the total amount of interest you pay is usually less than with long-term loans.
Disadvantages: Although the total amount of interest may be lower, the monthly interest rate on short-term loans is often higher than that of long-term loans. Because the loan term is short, the monthly payment can be large, causing financial pressure.
Medium term loan
Advantages: Medium-term loans usually have a term of 1 to 5 years, long enough for you to plan your finances and repay the debt gradually. The interest rate of medium-term loans is usually average, not too high or too low. Suitable for goals such as buying a car, repairing a house, or investing in a business.
Disadvantages: You will have to commit to repaying the loan over a longer period of time than with a short-term loan. Compared to a short-term loan, a medium-term loan often requires more complicated procedures.
Long term loan
Advantages: Long-term loans usually allow you to borrow larger amounts of money, suitable for large goals such as buying a house or long-term investment. Monthly interest rates on long-term loans are usually lower, making it easier for you to manage your monthly finances. Loan terms of 5 years or more allow you to repay the debt gradually without much pressure.
Disadvantages: Although the monthly interest rate is low, the total amount of interest you pay can be much higher due to the long term of the loan. Over time, the interest rate can change, affecting your ability to repay the loan. You are committed to repaying the loan for many years, which can be difficult if your financial situation changes.
Choosing between a short-term, medium-term or long-term loan depends on the financial needs and repayment capacity of the customer. Short-term loans are suitable for immediate financial needs and can be repaid quickly, while long-term loans allow you to borrow larger amounts and repay the debt gradually over a long period of time. Medium-term loans provide a balance between the two types of loans.
Source: https://vtcnews.vn/thoi-han-cua-khoan-vay-trung-han-la-bao-lau-ar904959.html
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