In this fast-paced world, personal loans have become the most flexible option in terms of repayments and loan amount availability. However, There’s no need to specify a particular purpose to your potential lender while availing of a personal loan. It is essential and feasible for borrowers to meet all their concerning expenses with ease and maximum convenience.
There are two types of Personal loans available depending on the assigned loan amount and tenure – short term & long term. In both the cases, you don’t have to provide any collateral, mortgage or assets like a car or home papers etc that means they are collateral-free. However, at the end of the session, lenders will offer a generous benefit of low rates on Equated Monthly Instalment (EMI). It is the reason for borrowers applying for personal loans.
When it comes to applying for a loan online, borrowing individuals can choose the repayment period as per their requirements. Usually, the personal loan tenure ranges from 12 months to 60 months and it varies depending on the lender. If you are planning for a small amount of loan with lesser repayment plan, then choose short-term personal loan but if you are looking for a longer repayment period, then opt for long-term personal loan. So in this article, we will be speaking about long-term personal loans. However, before you decide, you must know what is long-term personal loan and it’s pros and cons.
What Do You Mean by Long-Term Personal Loans?
Long term personal loan is a type of loan that runs for a longer tenure, like five to seven years or more than that. Generally, it will last for a couple of years. Longer-term loans’ EMI (Equated Monthly Instalment) amount is lesser than the short-term loan’s EMI (Equated monthly instalment) amount.
Here Are Some of The Pros of Long-Term Loans
Build up Loan Eligibility
Long-term loan tenure will get you a large amount of loan; On the contrary, longer-term reduces the EMI ( Equated Monthly instalment ), making easy repayments possible. Lenders check borrowers’ reimbursement eligibility and sanction higher loan amounts in case of low-cost EMI. So, there will be fewer chances of defaults.
Availability of EMI in a Smaller Amount
As already mentioned, taking longer loan tenure reduces the cost of EMI. As a result, repayments are easy to pay off the loans, and borrowers can pay off quickly without making any changes in their monthly budget.
Build Up a Credit Score
Taking long-term personal loans will surely improve your credit score, and it takes time to improve your credit score. So, availing of a long-term loan and being timely in repayment helps you improve your credit score.
Enables the Eligibility for Top-up Loans
Top-up loans refer to loans offered by Banks and financial institutions that let you borrow over and above the amount borrowed for your home loan. So, taking a long-term loan makes you eligible for top-up loans. For example – You are eligible for a top-up loan if you have paid EMI for 12 consecutive months or more. Suppose your loan EMI term is five years, then you can be eligible for a four-year top-up loan. Alternatively, for short-term loans, you don’t have this opportunity.
Here Are Some of The Cons of Long-Term Loans
Difficulty in Paying High Interest
An interest rate is compound and increases interest payments while choosing longer tenure personal loans. Generally, personal loans are expensive, and mounting interest for longer will have adverse effects. It will make you spend more than the money borrowed as a personal loan.
The Burden of Debt for Longer
Availment of personal loans for a long time can exhaust you with a more extended period of debts. Longer personal loans will make you suffer a debt burden. You must practise financial behaviour by following timely repayments and being responsible monetarily.
No Eligibility for New Loans
The loan availability for people is decided based on their repaying capacity. Apart from repayments, You might not avail another new loan as you are serving and committed to the current fixed loan. Before helping you with your loan, lenders check that your loan interest must not exceed 50 per cent of your net monthly earnings. Hence your current committed loan might not allow you to avail yourself of an enormous long-term loan.
The bottom line
In conclusion, deciding on the right loan amount and tenure is the type of loan that depends on your requirements, and it is a personal decision. Hence must be taken after gathering enough information. Consider the pros and cons of the type of loan. The best platform to seek a personal loan is Buddy Loan. Apply now and keep your financial stresses away!