Long term loans are personal loans that you can borrow over a longer-term – usually over 2 years. You can borrow a sizeable amount through a long-term
Long term loans are personal loans that you can borrow over a longer-term – usually over 2 years. You can borrow a sizeable amount through a long-term loan. While a typical loan can help solve a short-term financial crunch, long term loans facilitate big-ticket expenses through affordable and convenient monthly instalments.
Find out more about when to consider a long-term loan here.
What are long term loans?
Long terms can be secured or unsecured loans that you can pay off over a period of 5 years or longer. With a long term personal loan, you can spread your loan’s repayments over a long period and pay it off via reasonable monthly payments.
Long term loans are worth considering if you wish to pay smaller monthly payments. However, long term loans may cost you more in terms of interest in the longer run. The interest is payable throughout the entire term, along with the monthly instalments.
So, you may end up paying more in interest for a 10-year loan than a 5-year loan. Now, even if you get a loan offer with low interest, you may end up paying more if the term is too long. Therefore, a long term loan may prove to be more expensive overall.
How do long term personal loans work?
Where you can pay off a typical personal loan within a term of 1 – 5 years, it takes longer to pay off a long-term loan. If you apply for a long-term loan with a good credit score, income and employment history, you will most likely qualify for lower interest rates. But do think about how much you might end up paying in interest. Can you afford to pay this amount?
Even if you’ve bagged a great offer with low-interest rates, you should try to settle the loan as early as you can. It is also important to check if your loan agreement allows an early settlement and what charge will they impose on the loan’s repayment.
Lenders would normally base their decision as per the following:
- Loan amount
- Loan term
- Debt-to-income ratio
- Your credit history and credit score
So long as you fulfil the lender’s requirement, you can get offers with competitive terms, ergo, lower interest rate. To truly benefit from your loan, don’t just compare interest rates; try comparing the APRs.
Annual Percentage Rate or APR is the overall or holistic cost of your loan. APR includes all additional charges – loan origination fee or brokerage fee, per se, when you take out a loan. A loan offer with a relatively lower interest may have a higher APR. So, consider these extrinsic factors to make an informed financial decision.
The key to responsible borrowing is to ensure timely repayment of the loan. Lenders report all payments, timely or missed, to credit bureaus. So, missing a payment could be damage your credit score. Assess your affordability before applying for the loan to make an informed decision.
When to consider a long term unsecured loan?
Long term personal loans are a preferable option for those looking for payment flexibility and smaller, more affordable instalments for loan repayment. This type of loan would suit somebody with a variable or commission-based income, looking for convenient payment options.
If you choose a longer-term, you’ll pay lower monthly payments. Not all lenders impose an early repayment charge. In such cases, you have the flexibility of paying an extra sum now and then without incurring any additional costs.
However, it is important to consider the interest implications of unsecured long term financing. A lengthier term may cost you more in interest. So, weigh the pros and cons and assess how well the terms align with your financial circumstances.
How to find the best long term loans (UK)?
Consider the following while finding a suitable long term loan offer:
- How much money do you need to borrow?
- How long will you take to repay this amount?
- Have you explored the market for other options?
Evaluate your income and expenses and plan out the right loan amount. You should ideally only borrow an amount that you can afford to repay in the foreseeable future. It is also important to create a repayment strategy for the loan. Does your budget have enough room for monthly repayments? Do you have a contingency plan in place for repayments? Ensure that you plan the loan and repayments accordingly.
After you’re through with the planning stage, the next step is to explore the loan market for suitable offers. Compare personalized loan offers with real interest rates from multiple lenders at the click of a button with LoanTube.
Here’s how to successfully apply for long term loans:
- Choose the right loan type: Figure out the kind of loan that works best for you. You can either secure your loan against an asset, such as your home or borrow an unsecured loan without declaring collateral against it. Low credit score borrowers may have a better chance of getting a secured long term loan. If you have a stellar credit history, you may have a better chance of qualifying for an unsecured loan with competitive interest rates.
- Check the interest rate: Check the type of interest set for your loan. Fixed interest rates stay unchanged throughout the term of the loan. On the contrary, variable interest rates are subject to change as per market fluctuations. If the market rate rises, you may have to pay a higher interest rate with variable interest loans.
- File your application carefully: Supply accurate information to the lender. Fill the application form meticulously. Organizing your documents beforehand can help you minimize the chance of making an error.
- Look for additional charges: Thoroughly go through your contract to check for any additional charges other than the interest. In the case of long term loans, it is usually better to choose an offer without prepayment charges. This will give you more flexibility and control overpayments.
Long-term loans can be a great way to finance more significant expenses. However, it is important to consider that the longer the term, the more you may end up paying towards interest. Make an informed decision by appropriately choosing your loan option.