Hold your horses! Are you considering taking out a long-term loan? Get informed before you do with our guide as we divulge all you need to know when it comes to borrowing long-term.
How long do long-term loans last for?
Loans are generally considered to be long-term if the repayment period is longer than a year. In some cases, it’s possible to get loans with terms of up to 35 years – although with the exception of mortgages, few of us dream of paying off a loan for half of our adult life, do we? Loan terms on this end of the spectrum – ones spanning so long they could see the new generation – are usually what we call secured loans. This means they’re protected against an asset; more on this later on.
If you’re looking for a loan for less than a year, then technically you’d be after a short-term loan. Want to know more? Read our guide here!
How much do long-term loans cost?
It’s pretty tough to give a specific answer for this one, because how much your long-term loan costs will depend on a few factors. Of course, the actual sum you want to borrow will determine your loan cost, but your loan term and interest rate will also be included, as will any additional fees the lender charges.
As an example, let’s say you’ve bagged yourself a boast-worthy interest rate. Although your monthly repayments are reasonable, the loan itself might not be cheap. That’s because if your repayment period is ten years, then that’s a decade of monthly interest you’ve got to pay back. Therefore, in the end, it’ll cost you more overall.
In sum, the best loans are the ones that are affordable, but don’t have you bound by what’ll ultimately feel like a lifetime of repayments.
How much can I borrow?
If you’re looking to take out a long-term loan, then £1,000 is usually the minimum you can apply for. If you’re looking for less than this figure, then explore other ways to borrow money – credit cards and overdrafts can offer great rates.
With unsecured loans (also known as personal loans), by and large you’re allowed to borrow between £1,000 and £25,000. On the whole you might see slightly higher interest rates than with secured loans but it’s really dependent on what loan deal you find.
On the other end of the scale, there’s not a strict upper limit when it comes to long-term loans. Each provider will have their own thresholds. However, if you’re looking at big sums – those usually categorised as over £25,000 – then you may have to take out a secured loan rather than an unsecured loan. As we mentioned, secured loans mean an asset, like a house or car, is used as collateral. So if you fail to keep up with repayments, it could be your home that’s on the line. This is how lenders ensure they get their money back.
Should I take out a long-term loan?
Long-term loans have their fair share of both benefits and drawbacks.
Loans with extensive repayment periods tend to be accompanied by better interest rates than short term loans do. This means that your monthly repayments are far more affordable, allowing you to budget and plan your finances better.
Additionally, it’s a competitive market out there, so there’s no shortage of long-term loans to choose from. When you run your loan comparison, you’ll see just how abundant your options are! You can also borrow more money with long-term loans as you’ve got more time to pay it back.
What to consider before taking out a long-term loan
While you might get low interest rates with long-term loans, don’t forget just how long you’ll be repaying said loan for. By opting for a more manageable repayment plan, you may end up sacrificing how much money you save overall because you’re continuing to make payments over a longer period of time. Whether this is a worthy trade-off depends on what set up you think would work best for you.
If you want to pay off your loan ahead of time – let’s say, just for example, you win the lottery – you can’t do that without paying early termination fees. They’re as exciting as they sound. Factor in what these charges would be by reading your provider’s terms and conditions (although, you’d be forgiven for thinking about other things, had you just won the lottery…).
Because long-term loans generally deal with bigger sums, it can be harder to have your application accepted. And because the biggest loans get secured against high-value assets like homes, you need to have these as collateral to take out a loan in the first place. Sorry renters.
Where can I compare long-term loans?
None of us want a faff. That’s why we’ve made it really simple for you to compare loans with our loan comparison search engine. All you need to do is pop in your information and filter results. You can base your search on how much you want to borrow, what monthly repayments you can afford and how much time you ideally need to pay it off.