Loan, loans, credit and more debt! Is this the way you think, when it comes to any short term or long term borrowing, be it borrowing from friends and family or from bank lenders? It is not always this bad to think of loans as something negative. Even if the credit cycle is not that great, you are still eligible for some level of loan lending.
The advantage with long term loans is that it spreads over a minimum of 10 years or more with low minimum installment payments that are easy on the pocket and not too difficult to manage while managing day to day household expenses as well. Though a major disadvantage here is that long term borrowing proves to be more expensive than just the principal amount + interest fee. The borrower ends up paying more in interest spread over more installments.
The idea is to do your homework, before finalizing the amount and installments. It is only wise to pay back earlier to avoid paying high-interest rates, but long term loans do offer competitive interest rates as well. Though there are a number of long term lender UK institutions to choose from and see which lender offers the best interest rate.
Choosing between various long term loans
Some precautionary steps to follow will save you a dime and a dozen before you commit to something that you cannot get out of.
- First and foremost do your calculations in terms of what your basic requirement is. How much can you put down as a down payment?
- Choose how long will you take to pay back comfortable and then just to compare if stretched how long would it take?
- Compare the interest rates from all long term loan lenders in the UK to find the cheapest option available
- Also, consider whether the loan is secured or unsecured? Some loans e.g house or car or business financing are secured against your property. This is risky, but the only way a bank can get a guarantee if the borrower is unable to pay back on scheduled installments. A word of wisdom; it is close to impossible to find a long term loan with a payback longer than 10 years which is also unsecured. Banks usually do require some guarantee as part of the loan process.
- Type of interest rate – Most loans have a fixed interest rate; but some banks have a variable interest rate that fluctuates based on the economic market. Make sure you ask as many questions as possible from the bank/ lenders and also the right questions to know what you are tying in for.
- Rule of thumb; always know and reconfirm your borrowing rules. Read through the bank application guidelines very carefully before signing up for anything.
- Can you pay back earlier than the said date? – Some lenders keep an early payback fee. It is always good to be able to get rid of debts sooner than later; but also check whether paying the loan early is actually worth the while. Paying off higher interest loans and credit cards should always be first priority to ensure no added financial costs.
The good bit about long term loans is that it doesn’t affect an already existing bad credit history. In fact, long term loans for bad credit can actually be good if debts are consolidated and payments are being made as scheduled.