A long term loan as its name suggests is a loan which is taken out over a long period of time, usually a number of years.
Secured vs Unsecured Loans
Loans come in two forms, secured and unsecured. A secured loan is a loan which is secured against the value of an asset like a car or a house and an unsecured loan is not. If you default with payments on a secured loan, your asset is at risk of repossession. Lenders will quote their interest rate as an APR and secured loans tend to have lower APR’s and allow for larger sums to be borrowed.
When you apply for a long term loan, the lender will want to be assured that you can make the payments. Minimally, a credit search will be performed which will show up as a footprint on your credit file, too many footprints can adversely affect your score. If you check your own credit score as many people do before applying for a loan, this is known as a ‘soft check’ and does not impact on your credit score.
Long term loans can be taken out for a variety of reasons including the purchase of a car, a home, a business loan or home improvements. They can even be taken out to consolidate debt. Whatever the purpose of your loan, it is essential to make sure that you are able to afford the continued monthly payments. You should take into account possible changes to your circumstances over the period of the loan as defaulting on the loan can have implications for future borrowing and if the long term loan is a secured loan, you risk losing the asset.
If you are applying for a mortgage, the lender will assess all of your circumstances and will decide on how much he / she will be prepared to lend you according to your income. A credit check will be made and you will be asked for various pieces of documentation including proof of earnings. A mortgage is possibly one of the more complex long term loan options available.
Banks, Building Societies and Credit Unions will all be able to provide you with long term loan options. Peer-to-Peer lenders are becoming increasingly popular and would be worth checking. The companies operate online and you would be put in touch with a member of the public who has money to lend. Terms and conditions would then be negotiated.
It is worth remembering that a long term loan involves a long term commitment and there could be a lot at stake if payments are not met. Lenders have strict criteria so make sure that you are aware of all of their terms and conditions and if circumstances are such that you are unable to make a payment, contact them immediately to make an arrangement rather than leaving them to contact you.
Always look for the best APR on offer and do not assume that you will always be offered the advertised rate. Some people are, some are not for a variety of reasons. Sometimes the rate advertised only applies for the first so many borrowers. Shop around, do your homework and read the reviews!
A broker may also be able to help you with the process. He / she will have access to many providers and be able to use their experience to apply and help you through the filtering process.
Leave a Reply