Many loan seekers choose a long-term loan. If you make a credit comparison, you can see how the term affects the installment and the interest rate. The loan rates are getting lower the longer the term is chosen. Although the loan is more expensive overall, it remains affordable for many customers.
Long-term loans – the overview
With the term a loan can be paid or not. In our time, there are not many consumers who do not need credit. There is a search for a loan when major purchases are pending. A loan is needed if a new car is to be purchased. Current invoices can no longer be paid. This too is often a reason for a long-term loan.
Of course, banks like to offer the loan with a short term. This reduces the credit default risk over a long term. In the past, lenders have often had the experience that a long duration can often lead to a loan default. With a long-term loan, financial resources are scheduled for many years.
A financial bottleneck quickly arises, which can then no longer be absorbed, since the installments must be paid. The consequence is then a renewed request for credit, which is not fulfilled, because one already has to pay.
Long-term loans – the conditions
To get a long-term loan, credit seekers must meet some of the bank’s requirements. So the loan seeker must be of legal age, but if possible, should not have reached retirement age.
In addition to the sufficient income that must be above the attachment exemption limit, the Private Credit must be clean. The income ideally comes from an indefinite employment contract. This should also contain no probationary period and exist for at least six months. It is just the civil servants’ loans that are granted for a very long time.
At the same time a life insurance is saved. The borrower pays only low installments during the term. But in the end is the high final rate, which then covers the insurance. The normal borrower actually chooses a long term with 10 years. The official, on the other hand, can receive a 20-year loan. In general, however, not every borrower can choose a long term. The creditworthiness must be given.
Long Term Loans – Credit Comparison
Before a loan is applied for, loan seekers should make a credit comparison. This shows how long a runtime can be chosen. Of course, this depends on the amount of the loan. No lender will award a loan of 5000 euros with a term of 10 years. The credit comparison is easy to use. The loan amount and the desired term are entered.
With one click, customers see the best providers, the installment and the interest rate. Where the interest rate is to say that this is not for all customers in question. Interest rates are often calculated based on credit quality. So if you have a good credit rating, you will also receive a favorable interest rate. The rate can be lowered or raised with the appropriate duration. In addition, other terms such as special repayments and installment breaks can also be viewed.
Long-term loans – bad Private Credit
With a loan with a long term and a bad Private Credit, often no credit comes off. The Private Credit Score should be at least 50, so that banks agree to grant a loan. A bad Private Credit signals to the bank that the credit default risk is increased. Anyone who knows about his burdened Private Credit should get a self-report. This can be seen, whether the entries are rightly in it or whether they are already done long ago. If this is the case, the client should act as it increases his credit rating.
With bad Private Credit there will hardly be a loan with a German bank. Unless the customer has a high income and the entry is lighter in nature, such as a forgotten bill.
Long-term loans – the collateral
If the bank’s income is insufficient, so-called loan collateral may increase credit opportunities. Think of a property or a lenderable insurance. However, the surrender value of the insurance must be correspondingly high. However, a guarantor can also secure the loan.
The guarantor must be solvent and have sufficient income, a clean Private Credit and a permanent position. The bank must inform the guarantor of the risks of a guarantee.
If she does not do that and it comes to an emergency, that the guarantor would have to pay the installments and he can not, the guarantee is immoral. The guarantor can then get out of the guarantee. However, it has to be proven that the bank has not fulfilled its obligation here.
A guarantee is entered into the Private Credit of the guarantor, which can lower its credit rating. In any case, a guarantor must be able to easily pay the installments in case of loan default.
Long-term loans – residual debt insurance
Especially for loans with a long term banks often offer a residual debt insurance. This should occur if the customer becomes unemployed, if he becomes disabled or if he dies. However, this insurance is very expensive. The contributions are added to the loan amount, which suddenly increases the loan amount.
The residual debt insurance is very expensive and not appropriate for all loans. But if the customer wants to opt for a hedge, then he should look for an independent insurer. They are always cheaper than the insurance offered by the bank.
A long-term loan is often sought. Customers then pay low rates, they have good predictability, especially when the loan is paid for years. Thus, in any case, a credit comparison should be made so that a favorable credit comes about. Customers can go to their house bank for a loan or look for one of the many online banks. These have often better conditions than the house bank anyway.