Posted by Unlike a short-term loan, long-term loans provide loans for a longer period of time. The loan extends for more than 7 years with a fixed or floating interest rate. One can immediately use it for urgent needs or to pay for big-ticket items. However, because of no security, the interest rate here is too high. Yet, most people opt for long-term loans as the burden of paying the money immediately turns into instalments for more than 7 years. To avoid the higher rate of interest most of the borrowers take loans against their property.
In this article, we will discuss:
- What is a long-term loan?
- Do you need a guarantor for applying?
- Are they cheaper than short-term loans?
- What can you use it for?
- How to find a long-term loan for your needs?
What is a Long-term Loan?
Most of us need long-term financing at some point in our lives. There can be endless reasons such as making necessary home improvements or to finance our wedding or to soothe our wanderlust by going on a trip to our dream destination. A long-term loan is a financial product designed to cater to such requirements that generally, a credit card cannot support.
There are many private lenders from who you can borrow as low as £1,000 and go up to £35,000 and you have the freedom to spread the cost of the repayments over 7 long years. They make borrowing manageable for the debtors by allowing them a financial breathing space.
Do you need a Guarantor for Applying?
Not necessarily. Long-term Loans without a Guarantor are gaining hype in the United Kingdom. Most of the lenders are comfortable lending to individuals who do not have a guarantor – but they should have an excellent credit history or they can offer their home as collateral for the loan. Generally, lenders do not wish to lend to individuals who do not have a perfect credit record without a co-signer. That is because of the risk they have to take if they lend to bad credit borrowers. The chances of making a default at the repayment are high for borrowers with a poor credit score. For this reason, credit providers feel not to lend to such borrowers. However, the lending criteria differs from one lender to another. And even if you have a bad credit score, a lender might agree to approve your long-term loan without a guarantor.
Are they Cheaper than Short-term Loans?
The answer to this question is – it depends. The monthly repayment amount may be less than what you will have to pay if you take out a short-term loan. But if you are borrowing a long-term loan for 7 years, you may have to pay more in interest as compared to a small loan.
Let us consider this example:
Suppose, you take out a loan of £10,000 at 13% APR for 3 years, your monthly repayment amount will be £333.50 and the total amount that you will pay at the end of your loan term with the lender is £12,006.8. And if you take out a loan of £1,000 at 13% APR for 1 year, your monthly repayment amount will be £88.98 and the total amount that will be repaid by you is £1,067.78.
Therefore, before making up your mind to get a loan, you need to conduct an analysis of the needs and affordability of your own financial situations. If you think that you can manage to repay the debt that you take within 12 months, then you must choose a financial product to cater to your specific needs. Lenders have developed and improved themselves and that is the reason they have designed products to meet the current customer demands.
What can you Use a Long-term Loan for?
In broader terms, a long-term loan is a personal loan. Although a personal loan is an unsecured loan, a long-term loan may differ a bit and it is situational. Whether the loan being borrowed is an unsecured loan or a secured one depends on the borrower’s credit profile, affordability, and repayment capability. The loan amount can be used for any personal purpose and most borrowers use it for covering funds for huge expenses. Some of the popular uses are:
- Home Improvement
Many homeowners emphasis on upgrading their properties to surge the overall value of it. Renovating the entire property needs a huge amount of money upfront and it is not possible for most of the homeowners to have that much amount of money for the improvement purpose specifically. They take out a loan to carry out the necessary rework that their house demands.
- Wedding Expenses
Tying the knot comes with a hefty price tag. Almost all of us picture ourselves saying “I do” under the altar in a dreamy way. Weddings are precious and hence, people try to make it memorable for everyone who comes to bless the newlyweds who are setting their footstep to write an entirely new chapter of their life. To cover the shortfalls at a wedding, people take out long-term loans as it is cheaper than credit cards.
- Holiday Charges
Who doesn’t want to travel around the globe? There is so much to see and explore that we all have this feeling to see the world. And sometimes, taking a break from the busy and hectic life becomes quintessential. If you find yourself in a situation where all you need is a trip but you do not have enough funds, then this loan is your way out of the monetary trouble.
786 Loans for Long-term Loans in the UK
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