Question

If you borrowed $5,000 for four years, that would be a _________________.

short-term loan
long-term loan
critical loan
interest-based loan

Answer 1

It would be a short-term loan.  A long-term loan usually lasts 10-20 years, the average short-term loan is about 3 years.

Answer 2

Correct option: Long term loan

In finance, short term refers to a period less than one year or 365 days while long term is a period greater than one year or 365 days. Here the borrower is borrowing $5000 for a period of four years which is greater than 365 days. This is why it is a long-term loan. In the personal balance sheet, this loan should be reflected under long term liabilities.