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Understanding Long-Term Finance What is a Long Term Loan?
If you've found yourself in a situation where you're considering a long term financing solution, then we here at iThink Finance can help. In our guide, you'll find what you need to know to decide whether this option is right for you and your needs.
What is a Long Term Loan?
Long term loans are unsecured loans repaid over a repayment period of one or more years. These loans can make borrowing money more manageable, as spreading out of the cost of the loan can make the monthly payments lower than short-term loans.
What can they be used for?
The main advantage of this form of financing is that these loans allow applicants to borrow more money over a longer repayment period. Meaning that these loans are more suited to those who are looking to borrow large amounts of money for large expenses and long term projects.
Here are just a few of the most popular reasons why applicants take out personal loans with iThink Finance.
Short-Term vs Long-Term
Some of the main differences between long and short-term loans are
- The repayment periods
- When repayments are collected
- The amount you are allowed to borrow
Loans such as these can be made repayable over a period of anything from 1 to 20 years, and in some cases, longer to spread out the costs. While short-term loans are made repayable within anything from 2 weeks to a year, as the loan amounts tend to be a lot less. While these loans are made repayable through monthly and sometimes quarterly repayments, short-term loans can be made through both the option of weekly and monthly repayments.
Typically, the interest and APR on short-term financing can tend to be higher as the loan is repaid within a shorter time frame. These types of products are not designed to be used for extended periods of time.
Whereas the interest rates on long term loans substantially lower, it is worth taking into account that you will have to repay the interest over a longer period. When considering whether you are best suited to a long or short-term loan, contemplate your current financial situation and how this is likely to change in the future.
Repayments, Interest and Application Process How Do These Loans Work?
Understanding how these products work will help you when making an application and even loan repayments in the future. In this section, we'll talk you through how the interest, repayments and application process works.
How do they Work?
These loans work by allowing you to borrow large sums of money over a more extended repayment period than short-term and even some personal loans. While some long term loans such as mortgages will require you secure your loan or provide a guarantor, it is not a requirement. Still, you may be asked to provide one if you’ve a history of missing repayments in the past.
We’re a fully regulated and authorised broker, not a lender. We compare rates from our panel of over 30 direct lenders to ensure you get the lowest APR possible!
At iThink Finance, our application process has been specifically designed to ensure both speed and ease of the entire application process, with no tedious paperwork required.
All you have to do is click our ‘Apply Now’ button, and you’ll be redirected to our application form. Once you’ve reached the page fill out our 2-page form with all of the information needed to complete your application.
We’ll then check our panel of over 30 lenders in real-time to ensure that you receive an instant decision on whether you have been accepted for credit. We’ll then match you with a lender who can accommodate your needs and who best understands your situation.
The majority of the lenders that we work with can transfer you the loan amount within just 24 hours* of you being approved. We do not charge any fees for the service that we provide.
Eligibility Criteria Am I Eligible?
One of the biggest concerns when taking out any form of credit or financing is whether or not you are likely to be approved or not. In the following section, we talk you through the acceptance criteria of lender in addition to whether poor credit rating can affect your application.
Am I eligible for a Long Term Loan?
Lenders who provide long term credit will all each have different lending criteria you will have to meet in order to be approved. However, as a general requirement, most lenders will require you to meet the following:
- 18 years of age or older
- In possession of a bank or building society account in your name
- A resident of the UK for at the past three or more years
- In a position to be able to make the repayments on any money borrowed
- With a credit history which proves your ability to make repayments on time
If you can meet the above criteria, then it stands you in good stead for being approved by the majority of lenders.
If you are wondering whether you’re eligible, there are soft search loan calculators you can use to see if you’ll be accepted.
If you’re wondering whether you’ll be approved on account of your poor credit, there’s no need to panic.
If you’ve missed previous loan repayments, fallen behind on your bills, been issued a CCJ in the past, it could make finding a lender more complicated. However, rest assured that there are lenders who understand individual circumstances. Direct lenders will take this into consideration when considering your application.
Although it depends on the lender that you take out finance with, you may find that lenders will do one of the following:
- Charge you a higher rate of APR – as security some lenders may require you to pay a higher APR, this can be expensive. Therefore, it is crucial to assess whether taking out credit is worth it if you need to pay more interest.
- Ask you to secure your loan against an asset such as your home – if a lender is worried that you may not make repayments on any money that you borrow, then you may be asked to secure the loan against an asset. Therefore, in the case of non-repayment, the lender can legally seize the property to pay for the amount borrowed.
- Ask you to provide a guarantor with your application – by providing someone who can act as a guarantor for you, you give the lender with another means of ensuring that the loan will be repaid. However, you will have to find someone willing to act as a guarantor, accepting the risk of repaying the loan if you fail to do so.
What You Should Know Before Applying Things to Consider
As with any financial product, there are many potential advantages as well as pitfalls to each type of product. You should understand any form of credit before deciding on whether or not this loan is best suited to your needs and your circumstances. In this section, we’ll talk you through both the strengths and weaknesses of long term personal loans.
- Quick decision and application process – Applying for a loan online is a quick and easy process. This can be beneficial, especially if you find yourself in circumstances in which you need to obtain money quickly.
- Borrow more and repay over an extended period – In comparison to short-term loans, these loans allow you to borrow large amounts of money and pay them back over a longer period, making repayments more manageable.
- Lower rates of APR – These loans typically have lower rates of APR in comparison to short-term loan products such as payday loans and some personal loans.
- Repay over a longer period – Agreeing to pay back your loan over six years can be great for some as it can make repayments more affordable. However, take into account that you will also be paying interest and APR for longer, which can be expensive, depending on how long you have spread your repayments over.
- Could affect your financial opportunities in the future – If you've agreed to repay your loan over ten years, you need to consider how this will affect your finances in the future. As taking out a loan long term may affect your chances of being able to take out more credit during the loan duration.
- You could face an ERC should you wish to repay earlier than expected – If you do want to repay your loan before the end of your repayment period, then you may be charged with an Early Repayment Charge (ERC). This will be subject to your lender's terms and conditions.
A loan calculation tool is helpful when looking at what sort of repayments you will be able to afford; these will usually be on lenders websites. You can also use the APR that’s advertised on lenders websites to calculate the costs of borrowing the money long term.
As well as their appeal, this type of loan can be a lot more convenient for some than their alternatives, such as payday and short-term loans. However, as with many finance options, there are always alternatives if you find yourself stuck in a tricky situation with what can appear to be no way out.
If instead, you have decided after weighing up both the pros and cons of this type of loan, isn’t for you, there are other alternatives.
- Short-term loans – Borrowing a smaller sum and repaying your loan sooner then this will free up your financial circumstances in the future, a short-term loan may be more suitable. However, it is worth mentioning that short-term loans aren’t designed for long-term use and if done so, could accrue a lot of interest in the long run.
- Credit unions – Credit unions can provide users with a wide range of loans and in some cases at a fraction of the cost that it would take to borrow from a bank. If you're worried about the interest you could end up paying; then you may want to consider taking a visit to your local credit union.
- Borrowing from friends and family – If any of your friends or even your family members are in a financial situation which would allow them to be able to lend you the money, you could approach them. Of course, borrowing from those who are your nearest and dearest comes without a high-interest rate but can cause friction, so repay promptly to avoid conflict with your loved ones.
Frequently Asked Questions FAQ's
Do you still have some questions about our long term loans? We've comprised a list of some of the most frequently asked questions we get here at iThink Finance regarding our personal loans and how they work. Alternatively, if you haven't found the answer to the question you're looking for, feel free to get in contact with us, and we'll be sure to help you with your query.
What is APR?
APR stands for Annual Percentage Rate and is the yearly or annual rate that you will be charged for borrowing a sum of money. APR is expressed as a percentage of the loan amount; therefore if you borrow £1,500 over a year from a lender whose APR is 10%, you will repay £1,650.
How much can I borrow?
With iThink Finance, we help applicants borrow personal loans of between £1,000 to £20,000 over repayment periods of between 12 months to 72 months (1 to 6 years).
Can I repay my loan early?
Yes, if you repay your loan before the end of your repayment period if your circumstances change, then this type of finance solution does allow you to do so. However, you may be subject to an Early Repayment Charge (ERC) dependent on the terms and conditions that are set out by your lender in the loan agreement.
The possibility of having to make Early Repayment Fees can make this loan option a lot less appealing if there may be an opportunity for you to repay your loan early. Therefore it is essential that you completely understand the terms and conditions set out by your lender before you make any commitments.
All these loans have a 14-day ‘Cooling-off’ period, in which you can cancel the contract under the Consumer Contracts Regulations, which begins the day after you sign the agreement. You won’t be subject to make any repayments during this period should you cancel; however, you will have to repay the lump sum which was paid to you.
What are the interest rates?
As we are a credit broker and not a lender, we do not charge interest or fees with the service we provide. However, most of the long term personal loan lenders we work with offer applicants fixed interest rates; however, a few do provide variable rates which can fluctuate. Ensure that you check the rates of interest with any lender who you are considering taking out a long term loan with.
Am I required to pay any fees?
As a regulated credit broker, not a lender, we work efficiently search our panel of over 30 lenders and loan products to ensure that we provide applicants with the best solution. We charge absolutely no fees for the service that we provide our customers.
Why should I choose iThink Finance?
At iThink Finance, we help applicants looking for fast, flexible and competitive unsecured loans of between £1,000 to £20,000 for 12 to 72 months (1 to 6 years). We search our panel of over 30 UK lenders in real-time to ensure that you get an instant decision on your loan application. Here at iThink Finance, we match you with the best loan at the best price and charge no fees for our services.