Financial advisors recommend that borrowers go for short term loans. Short term loans cost less than long term loans.

The term of a loan refers to the how long the money is borrowed by a person. Loans that are borrowed for about one week to several months are usually described as short-term loans and, loans that are borrowed for several years, even up to 25 years are definitely described as long-term loans. But the description of whether a loan is short-term or long-term does not matter. What matters is the exact duration of the loan. Based on this duration, the total loan cost can be determined.

Determining the total cost of the loan

To have a pretty good idea of the total loan cost, one must simply recall a little multiplication. That is, the given annual interest rate must be multiplied with the given loan term. For example, the interest rate can be 5% for a loan which is worth