Should You Take Out A Loan Over A Longer Term And If So, What Should You Consider?

If you are in need of a lot of money for any given purpose (perhaps $25,000 or more), then you will usually be given the option of taking out a secure loan; if not, then the arrangement would be similar in the sense that upon securing the loan, you will need to take it out against your home or some other form of collateral. You may also be offered additional options apart from a secured loan, such as refinancing your mortgage or a home equity release, where you would free up some of the equity you have in your home. That might put you in a bit of a quandary — you want to borrow a larger amount of money and want to extend the life of loan, but you are only likely to qualify for such a loan if you have some sort of collateral or security you can place against the loan, such as your home or a newer automobile, but usually a home.

Another factor that you have to keep in mind would be the reason, or reasons why you want to take our such a loan. Quick explanation — it isn’t a very prudent idea to take out a loan with a ten-year LOL or longer if the overall cost of the loan you are taking out is not expected to add to the value of your existing property; you should never opt for a lengthy LOL for more whimsical or less essential purchases. These would include things like holidays, entertainment or furniture etc. These items only depreciate in value quickly and no-one would choose to still be paying for a luxury cruise, for example, ten years after they’ve taken the trip.

Some feasible uses for such a loan may usually cover home improvement, provided such improvements are meant to, or likely to increase the long-term value of your property. Alternatively, a loan of this length might be needed to increase the amount of business you can generate if, for example, you are self-employed and providing you are confident that your business has solid long-term prospects but you need the finance to expand the operations.

There are miscellaneous factors that may influence your decision to opt for a long-term loan, and one of them is to observe the prevailing interest rates; if these rates are low and expected to stay that way, then that may be the right time to apply. You might want to opt for a variable or tracker rate loan instead, as these two would factor in the ebb and flow associated with interest rate trends. One of your major considerations, however, should be to ask yourself if your financial position is stable and likely to remain so or only improve over the term of the loan. If you can’t be positive about that, then a long-term loan might only present trouble in the long run.

You should definitely be sure you are only borrowing what you need. It is downright frivolous to take out, oh I don’t know, perhaps an additional $5,000 in addition to your $25,000 loan if it isn’t at all necessary. Do not borrow a penny over what you actually need.

You can enlist an independent broker free of charge, provided he has the requisite skills and experience to properly advise you on what to consider and how to go about applying for such a loan.

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