Financing for Beginners: An Overview of Long-Term Loans

February 11, 2021

Money is a limited resource that can impact how you can decide your lifestyle choices and financing options. Investing in an asset or liquid find can limit your capacity to apply for other investments. This is why you must be frugal about allocating your funds concerning your current and future net worth.

Long-term loans provide the advantage of improving your cash flow by allowing you to have more capital on hand in the long-term. Since you have lower monthly payments, you generally have more money available for other expenses.

An overview of long-term loans

Long-term loans generally offer the same scopes and limitations as a financing plan. However, some loans differ in terms of loan amounts and interest rates. In simple terms, long-term loans are financing options that allow a borrower to have a much more extended repayment period. Since it’s a general term, it applies to numerous types and sub-categories of loans for different purposes.

In this article, we’ll go over four types of long-term loans.

1. Education loans

Education loans allow students to finance their education, primarily for long-term courses like engineering and medical fields. These loans offer a much longer repayment tenure in consideration of an applicant’s initial status of being a student. It’s not uncommon for repayment periods to extend as long as 30 years, depending on the term conditions. Keep in mind that an education loan’s interest rate and amount limit will depend on the lending entity and the course you’ll be loaning its tuition payment for.

2. Small business loans

Besides benefiting individual customers, long-term loans can also apply to business entities. It’s a valid financing option to begin or expand operations, whether you need to buy heavy machinery or commercial building spaces. Small business loans can have tenures that last more than 3 years and a flexible repayment plan that can last for much longer. Generally, all major and private sector banks offer small business loans as a part of their loaning portfolio for lenders.

3. Home loans

The best value for long-term loans is for considerable investments, like home loans. Since home loans are naturally long, it’s a perfect fit for people to benefit from their housing choice while having more time to repay their dues. A lender must submit their collaterals to the bank with a guarantor’s presence to sign the loan application. You can choose between settling for a fixed and floating rate of interest, depending on your financing flexibility. There’s also a pre-closure option for customers, which will vary whether your chosen bank allows it.

4. Personal loans

Personal loans are usually the last course of action for people who cannot submit collateral for security. Although it’s a viable option for financial emergencies, it has the drawback of having relatively higher interest rates. Thankfully, the advantage of having a long repayment tenure can allow you to pick yourself up over time to settle your dues.

Conclusion

It’s important to remember that there are pros and cons to applying for long-term loans. However, the same principle applies to any loan you wish to commit to. This is why it’s vital to understand your financial situation and determine the right loan option that will benefit you the most. Thankfully, securing loan applications is much easier today, with online platforms allowing borrowers to discover flexible payment terms at competitive interest rates.

Instead of going through traditional loaning options, you can look for accessible online solutions for your financial needs. Hoopla Loans is an online-based loan broker in South Africa that allows you to conveniently compare different lenders. Sign up with our platform today, and we’ll ensure that you’ll find the right financing plan for you!