Sometimes, people need extra money to handle unexpected costs. Short-term loans can help with small expenses, but for bigger unexpected bills, long-term loans might be a better choice. Long-term loans can be helpful for various financial needs because they allow you to repay the money in smaller monthly instalments, making it easier to manage your budget. In this article, we'll explore long-term personal loans in detail. Without further delay, let's get started.
What Is a Long-Term Personal Loan?
Generally, long-term loans include home loans, auto loans, etc. that have a repayment tenure of more than 5 years. Long-term personal loans essentially mean personal loans which have a loan tenure of more than 3 years. Typically, these loans can be used for any purpose but are mostly associated with high-value expenditures such as home renovation, higher education, medical emergencies, etc.
At Freo (Formerly MoneyTap) India, we offer long-term online loans with flexible repayment tenures of up to 3 years.
Advantages and Disadvantages of Long Term Personal Loans
Advantages of Long Term Personal Loans
High Loan Amount
Long-term loans are usually approved for higher amounts, and the amount approved depends on your repayment ability, your credit score, your income, etc.
Low Rates of Interest
Since the personal loan market is highly competitive, the interest rate of a long-term loan is usually low and affordable.
Repayment and Prepayment Options
Long-term loans come with flexible repayment and prepayment options. The long loan tenure ensures that the EMIs are small and affordable. You also have the option to prepay the loan before the completion of the loan tenure. This will help you save money on the interest you would have to pay on the full loan tenure. However, ensure if your bank charges a prepayment fee to close the loan before you prepay the loan.
Quick Approval and Fast Disbursement
A long-term personal loan is best for financial emergencies. The loan approval process is quick, allowing you to get access to money when you need it the most.
Collateral-Free
Long-term personal loans are collateral-free. This means you can get the loan without providing collateral or a guarantor.
Disadvantages of Long Term Personal Loans
Long-term personal loans have some downsides that borrowers should be aware of:
- Higher Interest Costs: Borrowers who opt for long-term personal loans end up paying more in interest over the loan period because of the extended repayment time.
- Impact on Eligibility: These loans can affect borrowers' eligibility for additional loans for a longer duration due to the prolonged commitment of the EMI/NMI ratio.
To address these drawbacks, consider making prepayments, either partially or fully, whenever possible. This can help reduce the overall interest expenses and enhance eligibility for other loans throughout the personal loan tenure.
How a Long-Term Personal Loan Works?
- You borrow the amount you need from your chosen lender.
- Interest and other loan conditions are applied to the loan amount.
- You agree to repay the borrowed amount along with interest on a date decided by you and the lender.
- The lender evaluates your credit profile to assess risk before approving the long-term personal loan.
- If your application meets the lender’s expectations, your loan is approved.
- You begin repaying the borrowed amount as agreed on the pre-decided date throughout the loan tenure.
What Are Long-Term Personal Loan Interest Rates?
The interest rate differs from lender to lender, but generally start from 10.99% pa. The long-term personal loan providers evaluate your creditworthiness and then decide the best interest rate for you. If you want to get the best interest rate, you should research and compare the various long-term personal loan offers and then make an informed decision.
Eligibility Criteria for Long-Term Loans
Generally, the eligibility criteria for long-term loans are as follows:
- Indian resident
- Above 23 years of age
- Salaried or self-employed professional/business owner
- Income of over ₹ 30,000
- For salaried, at least 2 years of work experience is required
- For business owner, the business should have been in existence for more than 1 year
Documents Required for Long Term Loans
To get approval for a long-term loan, certain documents must be submitted to the lending bank. The specific documents required can vary from bank to bank. However, most banks usually ask for copies of the following:
- Proof of permanent address
- Proof of identity, such as a passport, voter ID, or driving license
- Income proof of co-applicant/guarantor
- Optional guarantor form, completed as necessary
- Bank account statements if requested by the bank
- Salary slips of the applicant
How to Apply for Long-Term Loans Online?
Follow the steps below to apply for a long-term personal loan online in India:
- Compare various loan offers: While comparing various loan offers, check not only the interest rate charges, but also figure out the loan amount offered and the fees associated with applying for the long-term loan.
- Find out whether you are eligible: After shortlisting the lender, find out whether you are eligible to apply for a long-term loan with them. You can check your loan eligibility online by visiting their official website. Proceed with the application only if you are eligible for the loan.
- Fill out the application form: Enter the details asked in the online loan application form and submit the form along with the required documents.
- Get to know the loan status: Once the lender receives your application, it will be scrutinized in real-time, and the status will be communicated to you immediately.
- Get funds: After your loan approval, the final verification will be done, and the loan amount will be disbursed to you.
Ready to Achieve Your Goals? Get ₹5 Lakh in Minutes with Freo (Formerly MoneyTap)'s Long-Term Loan.
Frequently Asked Questions (FAQs)
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What exactly is a long-term personal loan?
A long-term personal loan is a borrowing arrangement designed for extended repayment periods, typically surpassing one year, thereby allowing for more manageable monthly payments.
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How do long-term personal loans differ from short-term ones?
Long-term personal loans offer longer repayment periods with lower monthly payments, while short-term loans have shorter repayment durations with higher monthly installments.
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What factors should I consider before applying for a long-term personal loan?
It's important to think about interest rates, fees, repayment terms, eligibility criteria, and the lender's reputation to make sure the loan fits your financial goals.
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Are long-term personal loans better than short-term ones?
Long-term loans can have lower monthly payments because you have more time to pay them back. However, they may end up costing more in interest and fees. So, it depends on your financial situation and needs.
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Are long-term loans only for individuals?
No, businesses can also get long-term loans for things like running or expanding their operations. The requirements may be a bit different for business borrowers.
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How does my salary affect my chances of getting a long-term loan?
Your salary is important for getting approved for a long-term loan. Banks look at your income to decide how much you can borrow.
