Long term loan: an amicable solution for your financial need
Financial loans that are sanctioned for more than 3 years are called long term loan. Long term loan can be of 4-30 years. Different modules of long term loan are found in market. These are car loan, home loan, educational loan, and different types of personal loans. Long term loans can be used for different purposes like buying machinery, purchasing a new property, or for some other reasons.
Long term loans are taken for borrowing hefty amount of money from bank or other financial institutions; because of high volume of loan amount tenure is fixed for long term, which is convenient for consumers as well as it is profitable for bank or lending institutions. The facilities often vary depending on the reason for borrowing the amount, eligibility of the borrower, types of the collateral security of recurring income. Mostly prepayment option is available so that the borrower can repay the loan according to personal discretion.
Features of long term loan
Long term loans have some salient features. Although some of the features may vary depending on the bank and loan modules, general features of these loans are mostly same all over India.
- Higher loan amount: Long term loan is taken for availing higher amount of loan.
- Lower rate of interest: Due to higher volume of money lending, this loan module is known for lower rate of interest.
- Necessity of collateral security: Collateral security is needed for borrowing this loan. This is a preventive method to realize the invested amount in case the borrower fails to pay the installment.
- Facility of repayment in installment: the loan is paid by EMI.
- Facility of prepayment available: Borrower can pay the amount in case a fund is available.
- Tax benefit is available: Borrower can enjoy tax benefit against the long term loan.
Eligibility of Long term loans:
Long term loans offer huge loan amounts and as such have stringent eligibility guidelines. However, these criteria differ with different lending banks. Listed below are some of the most common criteria that apply to almost all long-term loans.
- Borrower has to be aged between 18-35 years of age.
- Borrower should be earning a recurring and regular income.
- Borrower should be an Indian resident and an adult citizen.
- A guarantor is necessary to sign the loan application.
Documents required for long-term loans
Some specific documents are to be submitted to the loan issuing bank for approval of a long term loan. Although requirement of paper may vary slightly, most of the banks need copy of the following documents.
- Proof of permanent residence: Voter ID card, Ration Card,
- Proof of identity: passport, voter ID, driving license, PCA card, etc.
- Income proof of co-applicant/guarantor
- Optional guarantor form, duly filled
- Bank account statements if required by the bank: or last 6 months,
- Salary slips of the applicant: for last 3 months.
Some of the popular examples of long term loan
- Educational loan: Educational loan can be of 10-30 years. The loan needs collateral security. Depending on the mode of education repayment may start after 3-5 tears off taking the loan.
- Home Loan: The tenure of home loan may be up to 30 years. Rate of interest may vary from bank to bank. Collateral security is needed along with presence of co applicant and guarantor.
- Car loan: The car purchased under the loan remains hypothecated to bank. The tenure of this loan may be up to 7 years. Rate of interest may vary depending on the car model, eligibility of the borrower, and available loan offers.
- Personal Loan: Personal loan can be categorized a long term loan because the tenure can be taken for more than 3 years. However, this is not a secured loan and bank does not keep collateral security for this loan. Hence rate of interest can be higher than other modules of secured long term loan.
- Small business Loan: This loan is taken by business houses, which they can enjoy for a longer time and repayment can be done for a longer tenure.
- Long Term payday loan: This is one of the popular options of long term loans to meet sudden financial needs.
The main advantage of long-term loans is this category of loans offer extended tenures and hence is entitled to get lower rates of interest. The prime disadvantage of long-term loans is that the applicant has to submit some form of collateral to get this loan sanctioned