The workforce of the 21st century has taken a 360 in terms of HR matters, working hours and pay structures. Because of which the banking industry has also shifted its financing products to a great deal. At one time one was able to save through their salary and perks offered by the company. Since the millennials only want a high base salary, organizations have cut down on the perks like home and car allowance. These are now offered more readily through banks in the form of personal loans.
Long-term loans are offered for every major purchase in our lives like home loans, car financing, wedding loans, student loans, mortgages, etc. Home and car loans are more secure than the others simply because some collateral such as property is present to get the financing. To find out more about everyday long-term loans visit https://www.everyday-loans.co.uk/long-term-loans/
But are long-term loans better or more feasible to use? Let’s find out by doing a quick comparison.
With long term loans, individuals can chalk out a plan to purchase things that they might not be able to otherwise. For. e.g. financing for a house. The loan amount and interest are usually paid over a period of 10-15 years Or car loans that allow you to pay back over a period of 36 to 72 months. These loans allow the receiver to plan out their finances and the number of installments that they are comfortable in making.
Improve your credit score
This is one of the easiest ways to improve your credit score making responsible decisions and making the payments on time. Unlike short-term loans that enforce a person to pay in fewer installments; long-term loans tend to improve credit ratings as long as the payments are made on time.
Easier to maintain a lifestyle
Because the loan is spread over a longer period, the per installment payment is easier to manage and part with on a monthly basis giving you room to manage your disposable income. Because of the many installments, the interest fee+application fee+prepayment fee adds up to a higher amount being paid overall.
Whereas with short-term loans, the loan itself is given for a smaller amount therefore, the interest rates are much higher as compared to long-term loans. Though by paying off the loan over a shorter period of time, one ends up paying less than what they would have in a long term loan each installment payment is much heavier on the pocket.
Longterm loans are more difficult to secure than short-term loans as there is more risk involved and the receiver’s credibility is always in question.
The final question still remains; which is a better way of financing? This purely depends on each individual’s financial goals. If purchasing the house weighs more value for you, then you can find a way out to pay back in fewer installments thus, cutting down on interest fees. If you need a smaller amount and can pay back in a shorter period of time and don’t have a good credit history then go for a short-term loan. The choice is yours while you weigh the pros and cons carefully.