There may be several reasons to choose a long-term loan. In most cases, such loans are real estate loans, where the basic requirements are completely different from a conventional installment loan.
A loan with a long term is usually only chosen if the loan amount is very high. This is the case with a real estate loan, for example, because it involves large amounts of money. Accordingly, the interest is fixed for the term. Maturities of ten to twelve years are normal for such a loan. But there are also cases in which the borrowers also opt for long terms.
Reasons for long terms
Even with small loans, some consumers opt for long terms. The reason for this is the amount of the monthly rate, which is reduced as a result. If the income is not that high, the borrowers can choose this route. For this, however, it must also be accepted that the interest rates will increase due to the longer terms. In addition, the borrowers also have to expect that they will have to take out residual debt insurance as protection for the bank, because the bank naturally also sees that the risk of default is higher if the term is longer.
A long-term loan usually runs for between ten and twelve years. If this is a real estate loan, follow-up financing is usually provided because the loan should not be paid off during this time. Interest rates have changed accordingly during the period.
Before concluding follow-up financing, you should therefore compare the offers, because the customer is not obliged to conclude follow-up financing from the same bank that took over the first loan. This is certainly the most convenient option, but it can also be used to waste money. A comparison therefore clarifies who is the cheapest bank.