Private borrowers who have observed the credit market in recent years have seen significant changes. The loan offers on the market have improved significantly, particularly in terms of flexibility, the options for loan amounts and terms, interest and application, to the benefit of the borrower.
It is primarily thanks to the significant increase in supply that the borrower is able to secure a loan at attractive interest rates and flexible framework conditions, especially the online banks on the Internet have had an enormous impact on the variety of offers. In addition to the local banks and savings banks with branch networks, long-term loans are now also offered by online and direct banks on the Internet.
Choosing a long-term loan creates both advantages and disadvantages for the borrower. Whether a loan with long terms should be applied depends primarily on the individual financial situation of the borrower and the requirements for the loan product. Borrowers who want to apply for a loan with long terms should always compare several offers in advance and find out in detail about the effects of a long term.
Long-term loans – advantages and disadvantages
Choosing a long-term loan offer makes sense especially if the borrower has limited financial resources. Low-wage earners with a regular, but manageable income in particular often resort to a long term when borrowing.
Long terms help spread the repayment over a longer period of time, the rates are lower and the borrower can benefit from a lower monthly liquidity charge. In connection with the lower financial burden, the lower credit default risk for the borrower should of course also be mentioned.
A loan with long terms also has some disadvantages. Those who opt for a long term also have to expect high total credit costs. The high total credit costs can be attributed to the fact that (especially in the case of installment repayment) the interest costs are determined from the remaining debt.
Since the residual debt is reduced very slowly over a long term, the borrower can expect higher total loan costs. Another disadvantage that arises for the borrower is the longer capital commitment for the bank. As the bank provides the loan amount over a longer period of time, it has less capital available and there is also a higher risk.
Use loan calculator and save
The borrower can use a credit calculator to carry out a loan comparison taking individual information into account. By means of restrictions regarding the loan amount, term, repayment, income and much more. the borrower can also issue a long-term loan at the best interest rates.