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Most people think of a personal loan is known as a short-term financing method which is typically ranging from 2 years to 7 years of repayment tenure. Borrowers use these versatile loans to pay their various financial needs like to fund home remodels, pay your medical expenses, or even consolidate credit card debt.  

But do you know the fact that long-term personal loans also exist as short-term personal loans? Here’s what a borrower should know about this type of loan, eligibility check, repayment tenure including what will be the right option for you.  

What is a Long-term Personal Loan?  

In common words, a long-term personal loan has a maintained repayment term which is lasting up to 5 years. Many personal loan providers repayment terms between 5 years and 7 years, but some lenders offer terms as long as 12 years.  

Types of Long-term Loans  

Long-term loans assist in addressing important financial needs such as marriage, home construction, and business start-up. It has become one of the most popular financial instruments since banks provide a variety of options to assist you to select the best loan for your needs. The following is a rundown of different long-term loans: 

• Education loan:  

This form of loan is used to pay for certain courses, such as engineering or medicine, as well as to study abroad. The loan term ranges from 3 years to 30 years. The loan amount will also be determined by the tuition cost and any other expenses that may arise during the educational process. Frequently, the applicant's children complete the course and begin repaying the EMIs after landing a job. 

• Car Loan: 

A car loan is the most common financial instrument because it is one of the easiest to obtain. Banks have simplified the process of applying for and receiving a car loan. Car loans are the ideal way to buy a new or used car since they provide easy and rapid financing to the buyer. The loan term ranges from 2 years to 7 years. Because of the high level of competition in the market, you can negotiate a lower interest rate with your preferred bank based on your income and other liabilities.  

• Personal Loans: 

This sort of loan has a long repayment period of more than 3 years and can have a cap on the amount borrowed. Because a personal loan is an unsecured loan, the rate of interest is higher. A personal loan does not require collateral from the bank. As a result, there's a good risk you'll miss a payment. When money is needed to meet a financial contingency or an emergency, a personal loan can help instantly. 

Features of Long-Term Loans  

Long-term loans are borrowings that are arranged and repaid over a long period of time. The following are some of the most important characteristics of long-term loans: 

• Higher loan amount: In comparison to a rapid loan or a short-term loan, long-term loans allow for a larger principal amount to be borrowed. The bank will be able to provide higher loan amounts depending on one's financial capability. 
• Collateral: Long-term loans are only available if the collateral is provided. If the borrower is unable to repay the loan, the bank may take possession of the asset held as collateral to complete the transaction. 
• EMIs: The long-term loan can be repaid in Equated Monthly Instalments (EMIs) over a pre-determined period of time with the bank. The main amount and the interest are both included in the payments. EMIs can be paid with post-dated checks or by instructing your bank to debit the money from your savings account on a monthly basis. 
• Low-interest rate: The rate of interest is typically lower than other forms of loans due to the size of the loan and the longer-term involved. Because of the fierce competition in the market, the bank may offer lower interest rates. 
• Tax benefits: Tax exemptions are available on some long-term loans. One credit instrument that provides this benefit is a home loan. An automobile loan does not come with the perk of being tax-free. 

Benefits of Long-term Loans  

Availing of a long-term loan when you have a specific financial need is a wise decision. The following are some of the advantages of taking out a long-term loan: 

• Offering an attractive rate of interest: Long-term loans offer a competitive and lower rate of interest due to the longer duration and bigger principal amount borrowed. This loan requires the attachment of security, making it a low-risk transaction for the bank. 
• Helps to maintain liquidity: Because your larger demand is covered by a loan, the remaining funds can be used to pay other responsibilities. As a result, it alleviates any financial obligations that would otherwise exist. 
• Flexibility: Because of the nature of the long-term, it is largely individualized from applicant to applicant. If your paperwork and credit history allows it, you can negotiate the term and interest rate with the bank. 
• Online application: If you are a current customer of the bank for which you are looking for a loan, you can apply and submit documents online. This reduces the amount of time spent on boring paperwork and speeds up the entire procedure. 

Long-Term Loan’s Interest rates and Other Charges 

In the case of long-term loans, the interest rate can be fixed or variable. Depending on the type of loan, interest rates range from 8.90% to 12%. Before applying to a certain lender, it is necessary to compare interest rates from other banks. 

While processing a long-term loan, banks levy some fees. The following are some of the charges applied on it: 

Processing charge	Varies from Rs. 700 to Rs. 2500
Prepayment charge	Varies from 2% to 6% of the outstanding principal
Stamp Duty	Actual
Overdue EMI Interest	Around 2% per month
Cheque swapping	Rs.500 per instance
Legal and other incidental charges	Actual and non-refundable
Amortization schedule change	Rs.200

Eligibility Criteria of Long-Term Loans  

For long-term loans, different banks have established varied eligibility conditions. The general eligibility criteria for long-term employment vary depending on the type of long-term employment sought: 

• Salaried or self-employed employees of public and private limited companies between the ages of 21 years and 60 years.  
• A resident of India is required. 
• In most circumstances, a monthly income of Rs 15,000 is required. 
• PSU employees and central/state government employees 

Documents required for Long-term Personal Loan  

Any long-term loan requires the submission of certain documentation to the lending bank for approval. The list of these documents varies depending on the loan institution. A copy of the following documents is required by most banks. 

• Evidence of a permanent address 
• Passport, voter ID, driver's license, and other forms of identification are acceptable. 
• Proof of co-applicant/income guarantor's 
• Optional guarantor form, which must be completed in full. 
• If the bank requires it, you must provide bank account statements. 
• The applicant's payslips 

Top Banks offering Long-Term Personal Loan   

To meet the diverse needs of customers, all major banks and financial institutions provide long-term loans. This form of loan is offered by a number of banks, including: 

• Axis Bank 
• HDFC Bank 
• ICICI Bank 
• State Bank of India 
• Punjab National Bank 
• Kotak Bank 
• Bank of Baroda 
• Indiabulls 
• Citibank 
• Tata Capital 

Conclusion  

In this blog, you may get information on long-term loans that have a longer repayment period or tenure. A loan's repayment period can last anywhere from a year to 30 years. Long-term loans are defined as those that are repaid over a period of more than 3 years. You can check the best banks in India offering long-term personal loans to borrowers. The majority of long-term loans are constructed in such a way that they can be used by borrowers from various socioeconomic backgrounds. You can also contact Afinoz.com for any other financial advice.