Long Term Loans
Long term loans – a full guide and some hot picks of some current good long term loan deals.
Is a long term Loan right for you?
If you have a little extra income, but not enough to make a major purchase, a long term loan might be a practical way for you to buy the item now, but pay for it over time. You will pay interest, and perhaps some fees, so the item would be cheaper if you saved up your money and just purchased it outright. If you don’t want to wait though, or if it is an emergency need or a temporary deal on the item, a long-term loan could be the best solution.
Get the best long term loan
A good way to ensure you get the best loan for your circumstances, start with a comparison on Money.co.uk. You’ll want to know how much you want to borrow, and how much you could reasonably pay for a monthly payment. Then, using the comparison results you can find a short-list of lenders that might suit your needs.
The lender can help you work out how much the monthly payments would be for a given amount over a given period of time. You can share how much you want to pay monthly, and they can tell you how long it would take to pay it back (most loans have a maximum loan period of several years).
The longer it takes to pay it back, the more expensive the loan is likely to be, but a low interest rate might make a longer loan period quite practical, as your monthly payments will be lower. Shop around for the best interest rates for your needs, and rank the top 3 results from best to worst.
Loan applications often show on your credit rating, so apply for one at a time and make sure you are refused for the best one before moving on to your next choice.
Can I get a long term loan with bad credit?
Yes, it is still possible to get a loan, though the worse your credit rating, the less likely it is that a lender will want to take a risk on you.
If approved, you will also pay a higher interest rate than if your credit rating were higher. If you are getting the loan to consolidate some high-interest loans, and you have been making payments on those loans, it may be possible to reduce your monthly payments into one lower, longer-term arrangement.
If you are unable to secure a loan on your own, you may be able to get one with the help of a guarantor. A guarantor is someone who agrees to pay the loan off for you if you default. This person will have to have sufficient credit rating and/or security to qualify for the loan on their own.
What’s an instalment loan then?
An instalment loan is any loan that is paid back I a number of smaller payments – as opposed to one lump sum for the whole amount, plus interest.
Your lender will work out the total amount of interest due over the loan period, and the payments you will need to make each month to service the loan.
Are long term loans cheaper?
On a month-to-month basis, they can be considerably cheaper than shorter term loans, but over the full course of the loan it may prove more expensive. Even if you are paying a lower interest rate, if you pay the loan over several years, that lower rate can add up to significant expense.
It is best to make sure you can repay the loan early, without penalty, and then make higher payments whenever you can, to decrease the time period over which you pay the interest.
Benefits of a long term loan?
If you need to buy a vehicle, need repairs done to your home or vehicle, or even want to pay for a wedding without waiting years to get married, a long-term loan can serve that purpose. People even take out loans for special holidays or significant family events.
Long Term Loans | Frequently Asked Questions (FAQ)
How long can I get a long term loan for?
Long-term loan periods are not usually less than a year in duration, and can be as long as ten years or more.
Are long term loan interest rates fixed?
You can get a fixed-rate loan or a variable rate loan. Be careful if you get a variable rate loan; lower interest rates can mean good savings, but make sure you’re able to cover a significant rise in payments if interest rates increase. Before you agree to a variable rate loan, go over some of the likely worst-case scenarios and make sure you are comfortable with that possibility.
Fixed rate loans will carry a slightly higher rate when the loan is approved, but they won’t ever go up (or down) in response to Bank of England interest rate changes, so you can be secure that your payments won’t change from month to month.
Do I need to own a house to get a long term loan?
No, but any security will help you to get the loan – and help to get a better interest rate – especially if you have some hits against your credit rating. Banks give better deals to lower-risk borrowers, so anything you can do to decrease their risk, will increase your chances of a good deal.
What does APR mean exactly?
APR stands for Annual Percentage Rate. It is the percentage of the principle that you will be charged over the course of a year. 3% APR on a loan of £100,000, would mean that the lender will charge you £3,000 in interest per year. 5% APR doesn’t sound that different, but it would mean the interest on that same amount would amount to £5,000 per year – and extra £2,000! It is easy to see the importance of shopping around, even for a difference of 0.5% (£500 per year).
Because a lower interest rate amounts to less money paid back over the loan period, the lower the APR, the lower the monthly payments over a given period. Alternatively, the same payment made on a loan with a smaller APR could significantly shorten the repayment period, and make the loan considerably cheaper.
What shall I do if I cant repay my Long Term Loan?
The first thing to do is visit the Money Advice Service as this has a lot of helpful information. Be sure you can afford the repayments for any loan before you take one out, even if your circumstances were to change.