There are not many providers offering long-term credit. A conventional installment loan from one of the direct banks has a term of 12 to 96 months. Long-term traditional loans are real estate financing. Nevertheless, there are also earmarked online loans that have a long term. The advantage with these loans is that with a long term the monthly rate becomes lower. For the borrower, this represents a simplified repayment. It must be ensured that the interest rate is fixed during the long term.
The business loan with a long term – the location
A fixed interest rate provides the borrower with planning security because the fixed interest rate is not subject to any market fluctuations. Especially in the current low interest rate phase a real profit. However, it is not so good if the committed interest rate is always above the current interest rate level. Therefore, the loan seeker should necessarily make a credit comparison. Due to the many online offers, a fixed interest rate of 10 years is also recommended for a medium loan amount for a long-term loan.
Generally, the interest rate is higher for a long-term loan. In addition, they have to be settled over a long period of time. When making a loan, the loan seeker should therefore pay attention to a favorable interest rate, because as already mentioned, the interest rate remains throughout the term. If interest rate cuts occur, the borrower will not benefit.
In contrast to the real estate loans, which are usually provided with a fixed interest rate for more than 10 years, follow-up financing is tackled after ten years. Large amounts of credit play a significant role, which ultimately affects interest rates. In order to get a favorable interest rate on a normal loan, one must often search. For many banks, interest rates depend on credit, which does not benefit many customers from low interest rates.
The long-term business loan – the prospects
Not only the borrower benefits from long maturities, but also the bank. The total cost of the loan is increased, who then looks at how high the whole interest charge over the longer period, which will see that a considerable sum has come together. Especially when a low loan is taken, the interest burden no longer pays off on the ratio of the loan. The reason the term was stretched for a long time.
Then the low monthly rate is no longer significant, the interest is significantly increased by the long term. Banks want to hedge against a loan default because a long-term loan that lasts up to 15 years can bring significant changes from the borrower during that time. Especially if the changes are unfavorable. From this, the bank sees a loss of income as likely.
Before considering a long-term loan, a revenue / expenditure plan should be drawn up. This shows the amount of installments that can be handled when borrowing. With foresight, the loan seeker should plan the loan. The maturities play a crucial role. Thus, the short-term loan must be planned in exactly the same way as a long-term loan of more than 120 months.
It makes sense not to take out a loan of 5,000 euros and provide it with a two-year term, if the monthly installments can not be paid. On the other hand, it does not make sense to pay off a 1,000 euro loan for 10 years. The revenue / expenditure plan should therefore always be carried out before the loan request. So the loan seeker has an approximate overview of his financial situation in a few years.
However, the balance that results from the plan should not be fully used for the loan installment. Experts advise 1/3 of the remaining amount to be scheduled as a loan installment and to put the rest on the side. Often come unexpected expenses, which can then no longer be paid.
But also changes in the living situation, illness or unemployment should be included in the balance. For a long-term loan, this will be difficult, because nobody can look to the future. Here perhaps considerations that concern a hedge should be questioned. One topic would be a life insurance or a residual debt insurance.
Here, however, the loan seeker should keep in mind that contributions can also be made monthly for these insurances. Especially the residual debt insurance is expensive. Whether this ultimately pays off should also be considered.
Pay attention to the conditions
Loans of 180 months or 20 years often bring with them changes. This can also be positive if, for example, an inheritance is due when the borrower earns more money. Out of this situation, the loan could perhaps be completely redeemed or partially replaced. That’s why it’s important to include free special repayments in a loan agreement. These include additional repayment installments or early repayment of the loan.
Many banks are backing up for this situation and require early repayment of the loan a prepayment penalty. The bank can pay the lost interest because of the early settlement of the loan. That is why it is especially important to include these points in the credit agreement. But not only the premature repayment should be an issue, but also one or more rate defaults. As I said a long running time brings a lot of surprising, not only positive.
If an installment deferral has been agreed, the borrower can use it if there is currently a financial shortage. However, the bank can also pay royally.
In general, these loans are always more expensive, since loans that are fixed-rate, not advertised with an interest rate. Ultimately, nobody receives this interest because the credit rating plays a role. With a loan comparison, the interest level can be viewed. However, the interest rates are not identical to those the customer really receives. In most cases this is no longer a loan with low interest rates. The comparison is identical if the loan request and the term are equal to the example.
The loan seeker should therefore concentrate on fixed-interest offers when comparing. It should be noted that the length of the term increases the interest rate. For the loan seeker who wants a loan with cheap monthly installments, focuses on a long term. The reason is the monthly budget available to them. Therefore, many loan seekers apply for a long-term loan, even if the interest is higher and the total cost of the loan is higher. A loan with lower rates is only possible if the term is extended.
Actually, loans with a long term can only be found in real estate financing. But with a real estate loan completely different rules stand than with a consumer credit. In real estate financing, interest is fixed over a predetermined period of time. If the loan seeker takes out a loan in the low-interest phase, he can secure it for a long time.
Where the loan seeker applies for the credit, it is ultimately up to him. That can be with his house bank, if it meets him with favorable conditions. But also the many direct banks on the Internet provide interesting offers.
Before borrowing, the loan seeker should know that his income must be high enough and the private credit should be clean. A permanent job is accepted.