Long-Term Personal Loans Offer Many Benefits

When it comes to paying back the long-term loan, this can be a time-frame of 5-25 years. Since the payback time is so long, the lender can help the borrower reduce the monthly payments.

A long-term personal loan is a loan that allows lenders to lend money to people on a long-term basis. Also, long-term loans can come from lenders such as banks, credit unions, or online lenders, because lenders tend to lend money as long-term loans unless they lend short-term loans.

Borrowers can apply to borrow money by seeking out a loan officer or loan agent, usually found at lending companies, or they can apply via the telephone or even online. Interest rates depend on the amount of the loan, the time period for repayment – long- or short-term – and the financial status of the borrower, or the lack thereof.

What Makes Long-Term Loans Different from Short-Term Loans?

That the repayment term tends to encompass a period of time longer than other loans, such as short-term loans, is the differentiating feature for long-term personal loans. Now certain long-term loans are more easily had by folks who have reasonable credit ratings.

Of course, the interest rates for these are somewhat up there than the other types of lending agreements. And these require collateral or security. The lender can seize the property or collateral in case the borrower defaults on the long-term loan.

Two Types of Long-Term Loans

Two forms of long-term loans exist. They are the secured long-term loan and the unsecured long-term loan.

One: The Secured Long-Term Personal Loan

A borrower can land the large amount of a long-term personal loan by using a valuable asset to hand over to the lender as collateral or security. These can be: car, house, stocks and bonds, or other real estate, etc. When it comes to paying back the long-term loan, this can be a time-frame of 5-25 years. Since the payback time is so long, the lender can help the borrower reduce the monthly payment. Once the loan reaches maturity, the borrower can get the collateral or security back after the loan is paid off.

Two: The Unsecured Long-Term Personal Loan

Since these long-term personal loans do not require collateral or security, they are called unsecured long-term personal loans. Of course, these unsecured loans help boost credit histories as long as the payments are made on time and in full as the loan contract specifies. Unsecured loans cost quite a bit more in interest rates charged because they are unsecured. Which makes sense since the lender has no secured property to sell if the loan is unsecured. The amount of these loans can range from $1000 to $25000.

Two Types of Interest Rates

Long-term personal loans can carry two types of interest rates because these are the only two types of interest rates to be carried – variable rates and fixed rates.

One: Fixed Interest Rates

Now fixed interest rates are called fixed because they are fixed at one rate that never changes over the maturity of the loan. The fixed rate is determined from the average of interest rates over a previous time on the interest rate markets.

Two: Variable Interest Rates

Variable interest rates are called variable because the can vary over the maturity of the loan. These fluctuate according to the interest charged on the interest rate markets.

Five Benefits Seen from Long-Term Loans

1. Payments can be reduced from the sum of all payments if this long-term loan is for debt consolidation.
2. These loans help in the purchase of high-ticket merchandise such as a refrigerator or lawn mower.
3. These loans allow repayments over a long period of time which can range from 5-25 years.
4. By making payments on time and successfully retiring the loan can result in improved credit scores.
5. These loans are easily available for folks who already have better than average credit scores.

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