Personal loans are often classified as unsecured loans, owing to the fact that usually personal loans are smaller loans and which are granted by the lender on basis of the income of the borrower. However, of recent, these features have changed quite a bit as there are several lenders who also lend out secured and unsecured long term loans. With all these features in perspective, a personal loan can be simply defined as a loan, the disbursed proceeds of which can be used for reasons not specified for, at the time of applying for the loan or simply personal reasons. Thus you can borrow this loan for one or many purposes, any of which do not have to be specified to the lender while getting the loan. However it also does not mean that one has to be forbearing about the purpose of the loan, which can of course be disclosed if the borrower wishes to.
In accordance with this meaning of this definition, a personal loan can include, several other sub-types and classification of loans. For instance, a personal loan would include a lot things such as your credit card, secured or unsecured loans, loans and advances, regulator personal loans from banks, private loans, loans borrowed by students to meet their educational expenses, can be included in set of personal loans.
Long Term Personal Loans
Continuing with the same features of personal loans, a long term ones simply connotes that the loan’s total time period or the repayment period, that is the period from the disbursement of the loan till the last installment payment, is quite long. Here are some features of such a loan:
- Term/Time Period: The term or time period of this loan is often simply stated to be ‘long’ owing to the fact that there are no specific limits which define a loan to be a long term or short term one. Conventionally, a loan with a time period which is lesser than 12 months is said to be a short term loan whereas, a loan which has a time period more than 12 months is a long term loan. Hence a long term personal loan usually extends for several years and from the view-point of common borrowers like you and me, loans which exceed 5-7 years time period are deemed to be long term loans.
- Interest Rate: The best feature of a long term personal loan is that it is offered at a relatively lower interest rate. A lower interest rate is observed as a result of three important factors: firstly, the loan is a secured loan and backed by a collateral, secondly, it is a long term loan, meaning that the interest payable pans over a time period of several years and thirdly, it is sanctioned and underwritten with the help of very strict guidelines and rules.
- Secured Loan: Being long term loans, the principle, amount of the loan which would be lent would be high. Next, the number of installments and the interest which is going to be charged on the loan is going to be levied for quite a long time. In order to curtail risks, lenders demand a security or collateral.
On the whole, a long term personal loan is a great loan with great features, which do not make the deal very risky, both for the lender or even for the borrower.
How to Get Long Term Loans?
Getting a long period personal loan is especially difficult as a result of the strict conditions and requirements of the loan and also the requirements which are demanded by the lender. When you make an application, the lender will conventionally go through the following details while deciding creditworthiness and approving the loan:
- Credit Report: Since this loan is a long term one with several installments, credit rating and history demanded by the lenders is very tough and on the credit score part, you need at least 600+ score to get a decent loan. Apart from that the lender is bound to look out for good credit related habits and timely payment of installments.
- Security: Depending upon the volume or amount of the loan, the security such as real estate or an automobile is also assessed. The net worth or the realizable market value of the asset is computed.
- Income: The most important thing that the lender is bound to consider is your income, especially your monthly income minus your other debts, payable every month. The installment, interest and time period of the loan are set up in such a manner that the borrower is able to afford paying the installment.
Now, as a borrower, make it a point to apply for the long term loans after improving your credit score, as more the score, the lesser interest you will have to pay. Apart from that, also make it a point to approach banks and recognized lending and financial institutes as you get good low-cost personal loans with excellent terms and conditions.