> Long Term Loans - UK Guide
In a nutshell
A loan that is repaid over longer terms (i.e. many years).
Best Loan for
People borrowing larger sums, those that wish to keep monthly repayments as low as possible.
The amount you can borrow will depend on the lender and the loan product you choose to begin with. Your earnings will also be looked at and you may have your credit history checked and be expected to provide a list of outgoings. Other factors include whether you are a homeowner, the value of your property and, in some cases, what you want the loan for and how long you want it.
Long term loans can basically be arranged to last as long you want within industry standards - this is generally up to an average maximum of 25+ years. You can find lenders that will allow you to borrow for longer than that if necessary.
The longer your loan term, the lower your repayments will be. So a long term loan can help you borrow quite high sums of money and still keep your monthly repayments affordable.
Many long term loans are often tied into your mortgage - and, as such, may well be charged at mortgage rates - which are generally much lower than standard loan rates.
What to look out for
Long term loans may bring lower rates to the table, but there is a downside here too. Industry experts often recommend that you pay off any loans as quickly as you possibly can to make sure that you save as much money as possible. If you pay back over the long-term, all your lower monthly repayments will add up over time and you'll end up paying an extremely high amount of interest on top of the capital you originally borrowed. You may also run into problems if you decide to repay your loan early. If your lender charges an early redemption fee, for example, then you'll potentially be made to pay a high sum just to settle your loan. And, most long term loans will be secured ones - which means you'll have agreed to use your home as a guarantee that your lender will recoup their money whatever happens. So, if you run into repayment problems, you could lose your home. You can, of course, take out payment protection insurance to cover unforeseen circumstances - but this will add significant amounts if you're paying that every month over a number of years/decades as well as your standard loan repayments.
If you can't afford to borrow the money you need for shorter periods, then a long-term loan is probably your only option. You can try to find a product that is flexible so that you can overpay whenever you can to reduce your debt.