Long-term loans – borrowing money from banks for a term of five years or more. Typically, these people are taking loans for major purchases – cars, real estate, or of expensive repairs in the apartment.
The long-term loans include loans with a term of more than 5 years. Basically, these types of loans are used by individuals for the construction or acquisition of real estate – the term of this loan can be up to 30 years, at the same time the borrower must satisfy certain restrictive access to credit requirements of the credit institution. Car loans are taken, usually on a smaller period – here we can talk about two or three years.
Also, long-term loans are often used by companies and organizations for the implementation of investment and business development, with the aim of modernization or technical re-equipment. For legal entities, there is also the possibility of the necessary requirements for the approval of the credit institution granting the loan. One such requirement may be the stability of financial indicators, and – the term of existence of the legal person, or represented by a credit institution the business plan for the development.
long-term lending activities can be quite risky for banks, so basically, the issuance of such loans is carried out on bail of any property, or under compulsory presence of guarantors.
In addition to the need for collateral and applications for long-term loans are considered credit institutions longer than the short-term and medium-term loans.
And yet, in spite of the risks of credit organizations for long-term loans the interest rates are slightly different from the rates on short-term loans, and in the smaller side. This situation is due to the fact that the total amount of the over payment borrower’s long-term loan, still much higher than short-term loans. In addition – the main share of over payment falls on the first period of the payments (this is due to the distribution of shares in repayment of principal and interest in the amount of regular payments).
Banks issued loans to individuals, commonly referred to as “consumer”, as their purpose is always the satisfaction of the credit needs of the recipient. The most popular form of private lending is a consumer lending. In recent years, the lending segment is growing. Interest rates on consumer credits – the highest since the risks of banks is very large. Consumer loans can be subdivided not only by their function (in other words – the intended purpose), but also in terms of lending.