Everything You’ve Ever Wanted To Know About Long Term Loans
While some loans take years and years to repay, they also offer the ability to quickly throw your eggs into solid business and investment opportunities. And when dealing with sums as large as those, a smart investor can quickly make good on a loan and rake in piles of profit.
Long term loans come in different types, benefiting different people. Whether you’re an individual looking to buy a home or a conglomerate looking to expand your business, these loans can give you a helping hand. In this article, we will talk about the types of long term loans available and also discuss their importance and problems in detail.
- Mortgage Loan
A loan offered by a bank or financial company to help you buy a house or any other real estate property is called mortgage loan. This loan is popularly referred as home loan and is a typical long-term loan example. Both individuals and companies can use mortgage loans to their benefit. The three basic elements of mortgage loan are the collateral that secured you the loan, the principal and interest amounts, and insurance and taxes.
When you’re granted the mortgage loan, the home you’re buying is taken as the collateral for the loan. In case you failed to pay your debt, your home will be acquired by the bank as compensation. The total sum you borrowed as a mortgage loan is the principal amount, while the interest amount is the charge for your use of the bank’s money.
Cash loans offered to individuals and companies by banks or other financial institutions are called as debentures. This type of loan comes without the need for collateral. Debentures can be personal loans or business loans depending upon who takes it. In India, a debenture is usually given in the form of a bond, where the borrower signs an IOU to the lender. In this bond, the borrower agrees to pay back the principal amount along with the interest.
- Motor Vehicle Loans
If you’re looking to buy a vehicle, whether it is a two-wheeler, four-wheeler, or heavy-duty truck, you can get a long-term loan for it. You can be a salaried professional looking for a two-wheeler or a transport company looking to buy a couple of lorries, but rest assured that there are banks and other financial institutions ready to fund your purchase.
- Educational Loans
The educational loan is a highly popular type of long term loan in India. After this loan type has come into prevalence in the country, many students have benefitted from it. Usually all national banks are authorised to provide educational loans for students.
To get this loan, a student must co-apply to the bank with a parent, sibling, or spouse. If the loan is between 4-7.5 lakhs, then third-party security is required. If the loan exceeds 7.5 lakhs, then collateral is required. The repayment of these loans should start after one year from the time the student finishes his or her studies. Any default in paying the debt will affect both the student’s and the co-applicant’s credit history.
Problems And Importance Of Long-Term Loans
Long term loans can lead you into trouble if not managed well. They can affect you both financially and psychologically by being a constant burden on your head. But if you plan well from day one, then long term loans and advances can be a great way to get ahead in life.
In a way, this type of loan is a boon to anyone who dreams big, as you can get a large sum to pursue your dreams without having to worry about your current financial situation. Governments, companies, and individuals all use long term loans to boost the quality of their lives and operations. Since the repayment time is usually more than a year, you can easily plan well in advance to make the most out of these loans.
Some loan providers, like Bajaj Finserv, allow you to obtain finance for two wheelers and three wheelers at especially attractive rates.
Bajaj Finance Limited, the lending and investment arm of Bajaj Finserv group, is one of the most diversified NBFCs in the Indian market catering to more than 6 million customers across the country. Headquartered in Pune, the company’s product offering includes Consumer Durable Loans, Lifestyle Finance, Personal Loans, Loan against Property, Small Business Loans, Home loans, Credit Cards, Two-wheeler and Three-wheeler Loans, Construction Equipment Loans, Loan against Securities and Rural Finance which includes Gold Loans and Vehicle refinancing Loans. Bajaj Finance Limited prides itself for holding the highest credit rating of FAAA/Stable for any NBFC in the country today.