Long term loans are long term liabilities that have a term life of more than one year offered and their common features are the principal amount, interest rate, defined term and future settlement amount. Types of long term loans covered in this article are cash loans, debentures, mortgages, bonds and motor vehicle loans and the best loan deals are UK secured loans. Read this article to learn more about long-term loans.
Types of long-term loans
Types of loans are flexible interest rate and fixed interest rate loan which are further defined as:
Banks and other financial institutions offer cash loans to individuals and companies with payment terms spanning to more than one year. Cash loans are called debentures in the commercial and corporate language and are used to finance business operations and business expansion for companies while individual use the money for personal financing. Mortgages A mortgage is a homeowner loan issued by banks and building societies to help individuals and companies to buy houses and property. Most common mortgages and bonds are repaid in a period of twenty to thirty years. Bonds A bond provides the issuer who is the borrower with external funds to finance long-term investments, other business activities and expenditure. They are secure loans issued by the government like UK secured loans, public authorities, companies and credit institutions at a fixed interest rate and defined term such as government bonds. Motor vehicle and property loans
Motor vehicle loans are provided by banks and car dealers to help individuals and companies to buy motor vehicles at fixed or flexible interest rate and defined period of time. Also, property loan like loan for furniture is offered by furniture dealers in conjunction with banks to assist the public to buy property and repay the loan over a specified period of time. Educational grants Educational loans are provided by banks and other financial institutions to college and university students to do their studies. These grants are payable after completion of the studies over a period of time depending on the terms and conditions.
Importance of long-term loans
Source of funds It is a major source of funds to individuals, government and companies to finance their programs and activities such as to buy property and motor vehicles, to finance the government expenditure and business operations. Help in the planning process Long-term loans have a repayment term of more than one year which makes it easier to plan in advance on how to pay back the loan or loan consolidate, thus borrowing to settle off another loan.
Problems of long-term loans
If not managed well, it may lead to losses and dependency syndrome as many people or companies will continuously resort to borrowing.