Long Term Loans Guide

Long Term Loans Guide

Long Term Loans Guide

These days, many UK citizens are taking loans for various purposes. It may be to finance a new house, a new car, pay for their education or even their wedding. Most people don’t have enough money in their current account to directly pay for their purchases upfront. Hence, they prefer to take loans from lenders like banks or building societies. There are many lenders who offer short term as well as long term loans with affordable interest rates. Long term loans are a great option to invest in assets like car or property as their duration is of 20 to 25 years.

 

What Are Long Term Loans?

When you borrow money for any purpose, it is called a loan. And loans that have repayment duration of more than one year and less than 30 years are known as long term loans. This duration is specific and spread out for a larger number of years. The interest repayments are also likely to be the same over the loan term. This allows for budgeting. That means you know how much you pay in principal and interest payments every month. Not only individuals but also businesses can take these loans for their working capital assets like buying assets, inventory and equipment.

 

Can I Get a Good Deal If I Have a Good Credit Score?

Yes, there are high chances of getting a great deal if your credit score is desirable. A great deal means a high principal amount and a low interest rate. Every lender will check your credit file for your report and score. Those who have poorly managed their finances in the past usually have a poor credit score. If you belong to this category, getting long term loans for bad credit may be your one and only option.

long term loans

What Types of Long Term Loans Can I Borrow?

Banks and building societies offer various types of long term loans for different individual’s needs. So there are loans you can borrow for a home, car, higher studies, wedding, business and also home improvement. Let’s understand each of them in detail…

  • Home Loans:
    Home loans are an easy way to finance your first or second home. There may be two scenarios here- you’re currently living on rent and want to have a house of your own or you already have a house and want a second one to earn income from it. We’ve seen that mortgage (a common name for home loans) is more commonly taken out by people for a first home. The process of mortgage goes this way. You first look up properties on sale and get in touch with the seller. You finalise a property and pay an upfront deposit of 10%. Then you apply online for a mortgage for the remaining amount. Mortgages are typically given for 25 to 30 years. This gives you enough time to repay the huge debt you’ve undertaken. In most cases, home buyers borrow for 85-90% of the value of the property. This concept is Loan-to-Value (LTV). One thing to remember is that home loans are secure with your house as collateral.

 

  • Car Loans:
    After home, the second life goal for most people is owning a car. If you don’t have money to buy a car off the showroom outright, you can opt for various car finance options like Hire Purchase and Personal Contract Purchase. You can also take long term loans from one to seven years. Some loans are secured against your car while others are not. It’s always better to take an unsecured loan as you don’t run the risk of losing your car if you default on your payments.

 

  • Startup Loans:
    Entrepreneurs who wish to set up or grow their business within the UK can avail startup loans from the government. Some private lenders also lend loans to young organizations. When a business is just starting out, it may not possess the required amount of funds. Money needs to be paid for rent, salaries, power and utility, sanitation, etc. So a business can take long term loans and repay it as and when they get a foothold and profits start coming in. Startup loans are unsecured loans. A businessman doesn’t need to have any assets and doesn’t need to raise money through the issue of shares.

 

  • Student loans:
    Those UK citizens who wish to pursue higher studies and don’t have the financial means can opt for student loans. Student loans are offered by the government and enable access to top universities which otherwise wouldn’t be possible. Typically, they are long term loans that help to pay college and tuition fees. Disabled students and parents are eligible for some extra money over and above the regular amount. A student doesn’t need to worry about repaying the loan while studying. He or she has to pay it only once they get a job and start earning. That too, how much they’ll pay depends on how much they earn and not how much they owe.

 

  • Wedding Loans:
    Even if both partners are working, it can be difficult to save enough money for a grand wedding. In contrast to old belief, a lender can help you celebrate this one of many happy occasions without worrying about the cost. Most weddings can cost upto £25,000 so you can borrow if you’re short on money. You can pay back the long term loan over a period of five years and request a payment holiday for a few months following your wedding.

 

Can I Get A Long Term From You?

Yes, we offer long term loans specially designed for people with a bad credit score. We understand how tough it is to find a lender in such cases. Your application is either refused or you get an unfavourable deal. We eliminate both these issues and also a credit check. Thus, you can approach us anytime and our team of advisors will get back to you with a tailor-made deal.

 

What Benefits Can I Get From Long Term Loans?

Long term loans have quite a few benefits.

  • Higher Borrowing Limit:
    With a long term loan, you can borrow a huge amount of funds, as high as £300,000. Coupled with flexible repayment options and a fixed time limit, these loans are useful to give your home a makeover, manage your wedding expenses and more.
  • Lower Interest Rates:
    The interest rate and APR remain low due to the longer term of the loan. Interest rate and other fees combine to form the Annual Percentage Rate (APR). The APR is different for each individual or business depending on collateral used, guarantor or no guarantor loan, credit score of the borrower and time span of the loan. Also, interest rate is fixed during the tenure of the loan.
  • Rebuild Your Credit Score:
    If you take out long term loans and repay it monthly on time, it shows good credit behaviour. Lenders send your repayment report to UK’s credit agencies every month. This helps rebuild a positive credit score.
  • Flexible Terms:
    If you can afford to pay more in every monthly instalment, you can choose a shorter term, say for 10 years. But if you want to save money and reduce your monthly outgoings, you can spread out the cost over more years.
  • Fast Loan Approval:
    No more going to a lender to submit your loan application! Everything can be done online. You can get a fast loan approval within 2 to 5 days.

 

What Risks Am I Taking With Long Term Loans?

The potential risks with long term loans are:

  • Collateral as Security:
    Long term loans need you to pledge your asset to get the loan. This acts as a safety net in case you default on your payments. If it’s 3 months since you made your loan repayment, the lender can declare you defaulter and sell your home or car to recover his money.
  • Guarantor Required:
    A guarantor is a person who assures that they will repay your loan if you are unable to. This may be a relative or close friend. Many traditional lenders refuse to give no guarantor loans.
  • Long Term Commitment:
    Any form of debt gives repayment stress and depression. You may lose your job and along with that your source of income. Ensure to have a back-up plan in place to pay your long term loan.
  • More Interest:
    It’s all well to opt for a 5-year loan instead of a 3-year one. But, you’ll pay more interest for a longer term loan. So choose wisely.

 

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