For borrowers, the loan conditions are currently particularly favorable, especially in the area of interest rates, the offers of banks are very promising. When borrowing but is always the question of which loan term I should choose for my loan. Should I prefer a short-term installment loan or a long-term loan? The following contribution can help with this decision.
Which rather speaks for short terms of a loan
For each loan, regardless of purpose, borrowers can usually choose between different repayment terms of 12 to 120 months. Short maturities, however, currently have the advantage that comes from the current low interest rates. This makes the interest conditions cheaper, because in the short term, the bank assumes a lower credit default risk.
On the other hand, the loan can be repaid faster. Thus, the borrower is faster debt-free and contributes to even lower total cost of credit than a loan that runs for a long time. The disadvantage of shorter runtimes is that the monthly installments are higher. That’s why you choose shorter maturities on a loan only if you can afford high monthly installments or if the loan amount is kept at a lower level.
For whom the long repayment period is more appropriate
Many borrowers choose a repayment term that runs for 24 months or more. This is primarily due to a low monthly burden. However, a long maturity means for the bank that the credit default risk is much higher, which in turn increases the interest cost. Increased risk is compensated by the banks by higher interest rates – the total cost of the loan thus increased. A longer repayment term does not necessarily mean greater costs. Many banks give borrowers with long maturities specific special redemption rights. This can reduce the total costs by shortening the running times. When choosing a suitable bank for a loan help various comparison portals, which can be found in seconds, the right bank for his loan. On these or other questions regarding the banking and finance you can get the matching answers on free checking account comparison.
Personalize a loan
For which loan you should decide in the end, depends largely on the current life situation. It is important that you decide on such rates, which you can repay easily monthly. In doing so, one must also take into account possible future changes in the life situation. The useful life of the credit-financed consumer good should be at least as long as the repayment term. For some banks, it is possible to set the installment rate by choosing the term itself.