Short-term loans have lower interest, accumulate less total interest, and do not require significant funds compared to long-term loans.
One advantage of a short-term loan compared to a long-term loan is that it accumulates less total interest. Short-term loans are beneficial for borrowers who prefer to pay off the debt quickly and minimize the overall interest paid.
Furthermore, short-term loans do not require the lender to have significant extra funds, as these loans are often held for a short time before being sold to pool into financial securities. This characteristic makes it easier for financial institutions to provide short-term loans compared to long-term ones.
In addition, short-term loans usually have lower interest rates than long-term loans, making them a more cost-effective option for borrowers. Borrowers can save money on interest payments by opting for short-term loans.
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