Although many borrowers should strive to get rid of their debts quickly, in practice the opposite is rather the case. Loans with a long term are in constant demand from both banks and savings banks.
Long-term credit – the advantages
A loan with a term of 120 or even 180 months is particularly preferred by those who have only a relatively low income and who otherwise see no other option to take out a loan where the monthly installments are so low that they can also be used with one small income can be dealt with effortlessly. Maturities that go beyond this mean an increased risk for lending banks, which they pass on directly to their customers
The rates for a long-term loan are often so low that they are barely noticeable to the borrower. In this way, you can continue to make a living and repay the loan at the same time.
Long-term credit – the disadvantages
Anyone wishing to take out a very long-term loan should, despite all the advantages, be aware that such a loan is always considerably more expensive than a loan with a shorter term. In most cases, an installment loan is paid off within 12 to 84 months. Maturities that go beyond this mean an increased risk for lending banks, which they pass on directly to their customers. This happens almost exclusively in the form of high-interest rates.
Even if a borrower can prove that they have a permanent and unconditional employment relationship and at the time of borrowing it is absolutely certain that this employment relationship will still exist in 10 or 15 years, nobody can guarantee that this will actually be the case.
The banks also know this. For this reason, they will always provide additional security and charge a high borrowing rate for the loan. Anyone who carries out a loan comparison on the Internet will recognize this very quickly. Therefore, a long-term loan should only be taken out if there is really no other option.