Long Term Loans: Types, Application and Repayment

Aug 20, 2020

Short-term lending can be effective to deal with smaller, immediate expenses. However, when you need to fund sizable financing needs, the funding from these loans can hardly suffice. Under these instances, you can look at some long-term loan options. These loans come with tenures ranging between 3 and 30 years.

The market size of home loan, a popular form of long-term funding, is expected to reach Rs. 12.7 Lakh Crore by FY2020, according to a Financial Express report. It reveals just how popular these loans are with the Indian populace at large.

Characteristics of Long-Term Loans

Here’s what you can expect from these loans!

Listed below are specific characteristics common to most types of long-term loans –

  • High-valued loans, meaning you can avail a substantial amount when applying for these funding options.
  • The interest rate tends to be lower than other short or intermediate-term loan options.
  • These loans involve pledging collateral in most cases, due to their high-value quantum.
  • You may be eligible for tax rebates if you avail long-term loans. However, this facility is only available to select long-term funding based on specific utilisation of the advance.

Types of Long-Term Loans

You can avail such a term loan for various purposes, some of which are listed below –

  • Home loans – It refers to a funding provided to construct your home or buy a ready residential property or land. The tenure for home loans can range up to 30 years, depending on the bank or NBFC you choose.
  • Car loans – When you seek financial assistance to purchase a four-wheeler motor vehicle, it is called a car loan. Here, the tenure can go up to 7 years.
  • Small business loans – If your company is facing a shortage of funds, you can avail such a long-term loan as well. Generally, the repayment schedule extends beyond three years. In most cases, such business loans are unsecured.

Some education loans and personal loans can be classified as long-term loans as well based on the tenure they are available for.

Applying for Long-Term Loans

Are you pondering over long-term loan application process to avail a suitable credit with your lender?

The following steps should help potential applicants in acquiring such a loan –

Step 1: Visit your preferred lender’s office or go to the official website or app to apply for the advance.

Step 2: Check with your lender to see whether you fulfil all long-term loan eligibility criteria.

Step 3: Fill in the required application form.

Step 4: Provide all relevant documents, as per the requirements of your lender.

Step 5: Submit your application and wait for the approval.

Approval and disbursal of these loans take some time, generally a few days to weeks depending on the verification requirements. Nevertheless, you must plan repayment in the meanwhile.

Long-term loan repayment usually occurs through equated monthly instalments or EMIs. As a borrower, you need to bear a predetermined amount every month as EMI towards the repayment of your outstanding dues.

While the increased tenure in such long-termed credits can reduce monthly liabilities, it can also lead to a prolonged financial burden. Furthermore, such loans are often unavailable to individuals who are nearing retirement.

Gold loans can thus act as a smart alternative to long-term loans, fusing beneficial characteristics of both long-term and short-term funding options.

How Can Gold Loans Provide Similar Utility as Long-Term Lending?

You must be wondering how gold loans and long-term loans, such as home loans, can be similar. Well, loans against gold jewellery allow you to avail a sizable amount if you hold gold assets of high value. Additionally, gold loans, like long-term loans, come with low interest rates.

The only primary difference between the two is the tenure. Gold loans have substantially shorter repayment terms, ranging between 3 months and a year. However, you can make this shorter tenure work for you, ensuring that you are free from debt sooner than later and do not bear interest for a long time.

Are you still unsure? Well, check out the other beneficial aspects of a gold loan.

  • Quick approvals

Banks tend to take some time to process long-term loan applications, due to the substantial value of such credits and verification requirements involved. On the other hand, a gold loan provider like Rupeek Fintech Private Limited can disburse such loans in a matter of minutes. After you apply, your gold jewellery is assessed and evaluated by experts, based on which an appropriate loan amount is approved immediately.

  • Acquire a loan right from the comfort of your home

With Rupeek Fintech Private Limited, you can also take advantage of their ‘gold loan at your doorstep. Once you have sent an application online, the lender sends over a loan manager to verify and weigh your pledged gold items.

After the gold to be pledged is evaluated, the loan is approved and disbursed to your account. The entire process is over within 30 minutes. The manager only leaves with your pledged gold assets once you receive the funds. Thus, such swift and transparent processes make availing gold loans simpler.

  • Low interest rates

Although gold loan tenures tend to be much shorter, they come with more attractive interest rates. Low interest charged on your loan results in affordable repayment. Additionally, it also brings down the total cost for the said loan.

  • Secure storage for your gold jewellery

When you pledge a gold ornament to avail a loan, your lender is responsible for its safety and security until you can release it. Rupeek Fintech Private Limited has outlined a strict protocol to ensure that these valuables remain safe.

Once you hand over the pledged gold to your loan manager, it is kept in a GPS-trackable bag and transported to a partner bank branch nearby for storage in a secure vault. To ease your conventions further, the company also provides an insurance policy to eliminate any risk of financial loss in the case of theft or damage.

  • High loan to value or LTV ratio

As per RBI directives, you can seek a loan valued up to 75% of the total market value of your pledged gold items. It essentially means that if you pledge gold of Rs. 1 Lakh, you are eligible to seek a loan of up to Rs. 75,000 against them. When availing a gold loan from Rupeek, you can expect the highest LTV in this market segment.

The final choice of loan quantum to avail within this limit thus rests with you. Long-term loans can be extremely effective modes of funding in some cases. Nevertheless, you can check out gold loans as an alternative if you are comfortable repaying your debts within a shorter tenure and with more favourable terms.