The long-term loan is basically a variant intended for mortgage lending. The high loan amount secured by the property offers the borrower payable rates, low interest rates and long maturities. The risk of the financial institutions is manageable, since the property is present as a counter value. In addition, the customer is tied for a long time, which ensures the bank regular income. On the money market, however, is the trend towards long-term credit, which does not refer to mortgage lending.
Long-term credit for consumer goods
Increasingly, requests for long-term loans are made. These loans should be used to finance purchases (such as TVs, cars, furniture) that can not be paid immediately as part of the monthly income. The purpose of the long term is to keep the rates as low as possible and thus the monthly burden in the context.
On the other hand, there is certainly nothing wrong with it, but the financial institutions can pay well for the long-term loan. The risk that the income situation will change or defaults due to unforeseen circumstances will cause banks to charge higher interest rates and, in some cases, even higher processing fees. Not infrequently, additional collateral, such as a default insurance or the assignment of an existing life or pension insurance, required.
Applicants often do not keep in mind the long-term loan that the borrowed amount actually costs over the years, but enjoy the low monthly installments. It should be kept in mind, however, that consumer credit lending for more than 48 months is not only expensive, but also has a negative impact on the creditworthiness of the borrower. The rating, which is regularly carried out at each bank, is followed by an assessment which also includes such factors.
Long Term Loan – This should be noted
If you want to apply for a loan, you should intensively deal with the issue and calculate exactly what monthly burden you can wear without difficulty. The purchase, especially when it comes to consumer goods, should be necessary and can not be postponed. It is recommended for loan amounts of up to 5,000 USD to be able to create the installment amount so that the liability can be paid within the next 36 to 48 months. In this way you get affordable terms. If a long-term loan needs to be requested, it should be calculated how much is actually paid over the years and whether one is prepared to pay the higher interest and fees.
One important note is always: You should always keep your own finances under control so as not to accumulate a huge amount of debts through several small installments, which you can not pay off.
In principle, long terms are suitable for high loan sums, such as those needed for real estate. Small loan amounts can double, if you add up the installments over the whole time. In addition, the fixed interest rate usually has to be renegotiated after the fixed time, which can increase costs even further.