What is a Long Term Loan?
A long term loan is a type of debt that is offered for a longer tenure. It is a secured loan where the borrower needs to provide collateral against the borrowed loan amount. Unlike short term loans where the loan needs to be repaid within a year or less, in a long term loan, the repayment tenure can start from one year and go up to 30 years. As the loan amount is offered for a long tenure, the interest rates charged on long term loans may be comparatively relaxed than short term loans. The borrower can also choose between fixed and variable rates of interest to pay off the loan.
Why Do You Need a Long Term Loan?
Loans like Home loans, car loans, educational loans, Mortgage loans fall under the category of long-term loans. Usually, a borrower opts for a long term loan to meet his/her diversified needs, especially when there is a requirement for a huge amount.
Different Types of Long Term loans in India:
- Home Loan – It’s a type of long term that provides your finance either to purchase a home or construct a home. People usually avail of home loans for longer tenures like 15, 20, or 30 years.
- Plot Loan – A plot loan helps you purchase a plot that you can either use for constructing a home or carrying out other commercial activities. Such loans come with longer repayment tenures that may go up to 15 years or more, and the amount borrowed is usually a sizable one.
- Car Loan - A car loan or vehicle loan helps you purchase the care of your choice with ease. You don't have to spend your savings to fulfill this luxury. What you do is to provide a minimum down payment and get your car home. The remaining amount of your car price will be taken care of by your lender. Nowadays, many lenders offer attractive rates on car loans as the demand for car purchases has gone up remarkably in India with people having more purchasing power. A car loan repayment tenure usually varies from a minimum of two years to 7 years.
- Educational Loan – An education can help you or your children to pursue higher education abroad or in India. Usually, people take educational loans to fund tuition fees for courses like Engineering and Medical which are comparatively expensive and opt for a long-term loan period to pay back the principal as well as the interest amount.
- Long Term Payday Loan - Usually payday loans are offered for short terms at comparatively higher rates of interest. However, based on the financial condition of the borrower, he/she may request for an extended tenure and choose to pay off the amount in small installments over a longer period of time.
- SME Loans - This is also a type of long term loan that can be availed by both businesses and individuals. The amount received can be used for starting a new business or expanding your existing business or buying infrastructure or equipment. The repayment tenure of such a loan may start from 2 years and go up to 10 years
- Personal Loans - A personal can also be taken for a longer tenure. The repayment tenure of a long term personal loan can go up to 5 years. You can avail a personal loan to fulfill your both short term and long term needs, and choose a repayment tenure based on your repayment capacity
Key Features of Long Term Loans In India
Listed below are some of the important features of long term loans -
- Higher loan amount – you get to borrow a big principal amount to meet your bigger requirements like purchasing a home or land, or a luxury car.
- Attractive interest rate – the lender may offer you a competitive rate provided you maintain a good relationship with the lender. You can also choose between fixed and variable rates of interest to pay off the loan.
- Collateral required – as it is a secured loan, you need to provide collateral against the borrowed amount.
- Prepayment or part payment available – you can choose to repay the loan before scheduled tenure or pay a major amount partially, depending on your capacity.
- Monthly EMIs- You can repay both the principal and interest amount in small amounts using help equated monthly Installments (EMI). This helps you utilize your income in a productive way as you can concentrate on meeting your other expenses.
Benefits of Long Term Loans
A long term comes with a plethora of attractive benefits which include -
- Tax Benefits – The borrower can avail tax benefit under section 80C of the Indian Income Tax Act 1961 on a home loan which is a long term loan. However, tax benefit is not applicable on car loans which are also a long term loan.
- Lower Interest Rates - As the tenure of a long term is longer, loan term loans are offered at a comparatively lower interest rate with the flexibility of choosing between fixed and flexible rates of interest.
- Flexibility - Long term loans offer a number of flexibilities – you can negotiate with your lender for a competitive rate if you have a good credit history and your relationship with the bank is good. You can also choose flexible loan repayment tenures as per your convenience and, also opt for prepayment and part payment.
- Hassle Free Application Process – nowadays, you can apply for a long-term loan online and avoid the pain points like visiting your lender, submitting hardcopies of your documents, etc. This helps you save time and energy.
Long Term Loan Eligibility Criteria
The following eligibility criteria are required to be eligible for a long term loan. However, it may vary from lender to lender.
- Should be an Indian resident.
- Must be a salaried or and self-employed individual.
- Should have a bank account/Income should be received in bank.
- Minimum age should be 21 year
- Maximum age should be 60 years
- Employees of public and private limited companies and PSUs are eligible.
- Minimum income requirement is Rs 15,000 per month.
Documents Required for Applying Long Term Loan
Any applicant needs to submit the following documents while applying for a long term loan:
- Proof of identity (PAN/ Aadhaar Card).
- Proof of address.
- Optional guarantor form, duly filled
- Income proof of co-applicant/guarantor – if applicable
- Proof of residence (Passport/Driver’s license/Voter’s ID/Phone or Electricity bill)
- Latest 3/ 6 months bank statement where salary is credited
- Salary slips for last 3 months
- 2/3 passport size photographs
However, there may be changes in the above requirement based on your lender.
How to Apply for a Long Term Loan
There are two ways you apply for a long term loan in India – either online or offline.
- You can apply online by using the website of your chosen lender or downloading its Mobile App from Google Play store.
- In both places, you need to select the loan you want to take and click on apply. After that, you would be required to put your personal details and other relevant details to complete the application process.
- Once the application process is complete, you would receive an acknowledgement email and/ or SMS on your phone.
- Now, your lender will review your application and upon successful competition, the loan amount will be credited to your account in a short time.
You can also choose to apply for it offline by contacting your lender physically – by visiting their branch or contacting customer care who will guide you throughout the process and provide your necessary guidance to apply for a long term loan
Interest Rates and Other Charges on Long Term Loans in India
In a long term loan, you have the flexibility to choose between fixed and flexible/adjustable rates of interest to pay off the principal amount. Interest rates charged on long term loans differ from lender to lender. However, almost all lenders take into account - your relationship with them and credit history before accepting your loan application. The following charges applicable on a long term loan -
- Processing fees - may start from Rs. 700 to Rs. 2500
- Stamp Duty ( in case of home loan) – Actual
- Overdue EMI Interest – 2% monthly
- Amortization schedule change - Rs 200/-
- Cheque bounce charges - Rs. 500/-
- Legal charges, if any – Actual and non-refundable
- Prepayment charge – 2% to 6% of the outstanding amount
***Please note that the above mentioned fee and charges are only indicative. You are advised to check with your lender directly before applying for a long term loan.
Steps to Follow Before Applying for a Long Term Loan
Listed below are some of the common steps you need to follow to apply for a long term loan in India -
- Compare Loan Offers: once you decide your loan amount, check and compare the various loan offers available in the market and know about loan repayment tenure, processing fee and the interest rate charged, and late payment fees. The best is to conduct an online survey with the help of various third-party websites available. It helps you save time and energy
- Choose Your Lender: Once you have a clear picture about the loan market and various offers available, choose a lender that would offer you the best rate with a convenient repayment tenure.
- Check Your Eligibility: Now, check your eligibility which you can do either online or contact the customer care of your chosen lender to know the same
- Fill Details & Apply: Once you are confirmed about your eligibility, you can apply for a long term loan online by filling in the below mentioned details -
- Personal information – name, gender, nationality and date of birth.
- loan amount you wish to borrow
- Loan tenure
- Scan and Attach required documents.
Upon successful review of your loan application, the sanctioned amount shall be credited to your bank account in 1/2 days.
Additionally, you can complete the entire application process offline by visiting your bank/lender or with the help of any bank representative.
Money View Long Term Personal loan
Money View, being one of the most sought-after private finance companies in India helps you meet your diversified needs by providing personal loans for up to 60 months. You can use the amount received as a personal loan to accomplish any tasks ranging from home innovation to fund a vacation or consolidate your existing debt
Now, how to apply for a Money View personal loan? It’s pretty simple - visit the website or download the Money View Mobile app from Google Play Store, check your eligibility and apply. Once your application is approved, the loan amount will be credited to your account in 24 hours.
Long Term Loan FAQs
- What is the purpose of a long a term loan?
A long term loan is designed to help you meet your requirements that require a huge investment on your part. Loans like home loans, mortgage loans, car loans, educational fall under the category long term loan.
Is it mandatory to provide collateral if I want to apply for a long term loan?
Yes. You need to provide collateral if it is a long term loan. For example, if you purchase a home with the help of a home loan, your lender would use the home as collateral /security against the loan amount.
Is it mandatory to have a co-applicant in a long term loan?
No. it’s up to the borrower whether he/she wants to borrow alone or add a co-applicant. However, if a borrower’s monthly income is not sufficient enough to fulfill the loan eligibility requirement, then he/she can add a co-applicant.
- What is the minimum credit score required to be eligible for a long term loan in India?
It’s advisable to have a credit score of 750 or above to be eligible for a long term loan in India.
- Is personal loan a long term loan?
Yes. It can be considered as a long term loan depending on the loan repayment tenure chosen by you. You can repay it within a year or two, or request for extending the tenure up to 5 years.
- Is Stamp Duty charges applicable on all long term loans?
No. It’s applicable only on home loans.
- How is an EMI calculated?
It is calculated using any EMI Calculator available online where you need to fill in the following information – loan amount, loan tenure and the applicable rate of interest. The mathematical formula used for calculating EMIs is – EMI = P × r × (1 + r)n/((1 + r)n - 1). Here P stands for loan amount, r for interest rate and n for loan tenure in number of months.
- Do all long-term loans provide tax benefit?
No. For example, a car loan does not provide you tax benefits.
- Can I avail of tax benefit on an educational loan?
Yes. You can avail of tax benefits on your educational loan under 80E of the Indian Income TAX act, 1961 for a period of a maximum of 8 years. The interest paid on your principal amount is considered a deduction.
- What is the pre-closure of loan?
If you can repay your entire loan amount (both principal and interest payment) before the scheduled date of repayment, it’s called pre-closure. Your lender may charge you loan pre-closure charges.