Long-Term Loans: Its Advantages And Disadvantages


In the world of today, with its financial possibilities, people take various types of loans. There are two different major types of credits:

  • short-term and
  • long-term loans.

In order to take the loan that is really beneficial for you, you have to understand your personal needs correctly. If you can satisfy them with short-term borrowing, choose this one. If not, you have to go for long-term one.

Advantages Of The Long-term Loans

Long-term credits help the borrowers to get financing for big purchases. Here are the main goods and services the people buy with long-term credits:

  • cars;
  • houses;
  • organisation of weddings, birthdays and other celebrations.

Buying such goods and services requires considerable financing, that is why people take long term loans. Here are the main advantages that long-term borrowing offers:

  • The interest rate for long-term borrowing is usually lower than for short term. Therefore, it easier to pay the monthly payments.
  • The term of paying the loan back is longer. The borrower does not need to hurry up with work in order to pay for the loan quickly. He simply needs a stable source of income to pay back.
  • Banks propose attractive bonuses for borrowers. Banks value clients and make everything possible to attract long-term borrowers. That is why loan taking is advantageous.

These are the main pros that long-term credits bring. They enable people to buy expensive goods that cost a lot, and use them while they actually pay for them. It is important to choose the right bank for your credit taking. A good financial institution will offer a lower interest rate.

Disadvantages Of The Long-term Borrowing

There are definitely many disadvantages of this type of credit. Here are the major ones:

  • The applicant to get the credit has to have a stable source of income. This obligatory. Unless you have one, it will be impossible to get a long-term credit.
  • The borrower has to have a good credit score. Big loans are distributed only to reliable clients. The people have to show that they can pay the credit back. Otherwise, the bank won’t issue the credit.
  • The longer is the term, the more money the client will spend on interest. Despite the fact that monthly payments are smaller, the overall sum of interest is higher than for short-term loans.

Before taking the loan it is important to remember that each banks proposes different loan agreement. It is very important to read the agreement attentively before taking the loan.

You can always call the bank and ask your banker about terms that apply to getting a  long-term credit. Find out as much information as possible.

Borrowing money requires a person to be responsible and accurate in payments. That is the only way to succeed in loan taking. Calculate your earnings and spendings well before taking any type of credit.


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