Banks provide their customers with long-term installment loans for medium and long-term financing. These loans can be requested from direct and branch banks. When considering the conditions, there are usually large differences. A comparison of different loan offers is therefore particularly advisable for loans with long terms.
Long terms can result in additional costs
A new kitchen, exclusive home furnishings or a new car is often very expensive and is therefore financed by a loan. If the installment payment exceeds five years, experts speak of a medium-term loan. The longer the installment payment is agreed, the lower the monthly charge for the borrower. However, the amount of interest payments increases with a longer term.
Depending on the financial institution, loans with a term of 84, 96 or even 120 months may have higher effective interest rates than loans with shorter terms. Borrowers must also pay particular attention to the costs that may also arise when borrowing. The longer the term is selected, the smaller the number of providers of long-term installment loans.
Home finance is the classic for long-term installment loans
Home finance is the prime example of long-term installment loans. Most of the loans granted as annuity loans are paid off over a period of 10, 15 or 20 years at a constant rate. With this loan, the repayment increases and the interest burden decreases over the years. Borrowers who choose too little repayment with this form of loan often have to accept follow-up financing after the loan has expired. To keep follow-up financing as low as possible, borrowers must compare different loan offers.
A few percentage points in the effective interest rate can mean several thousand euros in additional costs over the long term. Since long-term installment loans can also be negotiated individually at many banks, borrowers have the option of agreeing one or more special payments.
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