First of all, a long term also means a lower repayment installment in the installment. The lower the eradication, the lower the monthly burden. This can be beneficial in two ways. The loan amount is so high that the borrower could not serve a shorter term.
This case can occur, for example, if the house major renovations are pending and the bank offers a so-called home loan. This is earmarked real estate owners available, without that therefore a mortgage must be entered. The interest rate level ranges between classic real estate financing and installment credit.
Cars are today, unless it is not used diesel vehicles, also no bargain. Even a mid-range vehicle with sophisticated equipment can easily cost 40,000 euros or 50,000 euros. Due to the long life of the vehicles, ten years of use are not uncommon and would be congruent with the repayment term.
Another case may be that the interest rates are so low that even the extra expense caused by the longer term does not hurt, but there is enough financial leeway in the household budget.
Running times comparison
Here is a comparison with different terms:
|120 months running time||84 months running time|
|The required regular rate is:||Euro (monthly) 482.8||The required regular rate is:||Euro (monthly) 586.48|
|Total interest and fees:||Euro 7936.45||Total interest and fees:||Euro 6,301.95|
|Total expenses:||Euro 57936.45||Total expenses:||Euro 56301.95|
|Effective annual interest rate:||% pa 3,042||Effective annual interest rate:||% pa 3,042|
The difference per month amounts to € 103.68 to the detriment of the shorter term. The additional expense of interest, converted to the month, amounts to only 13.62 euros. In other words, despite the increase in interest expense, the longer maturity relieves the monthly budget by 90.06 euros – a point that argues in favor of the longer fixed interest rate if household disposable income is more important than the increase in interest rates.
What are the disadvantages of the long interest rate fixation?
In a low-interest phase, there are actually no disadvantages. But if you take out a loan with 120 months maturity in a high-yielding phase, you will be annoyed if the interest yields during the repayment phase. He will probably think about rescheduling. The consequences of premature repayment are described in the following section.
What should be considered when concluding a loan with a term of 120 months?
Interest is not everything with a loan. Sometimes the conditions are a more important aspect.
Ten years is a long time, nobody can predict how his financial situation will develop at this stage.
Ideally, the borrower will unexpectedly get paid and could replace his or her loan early or early. In this case, it would be desirable if the bank accepts early redemption without prepayment penalty. If this is not the case, the institutions charge one percent on the outstanding debt repaid over a period of more than one year. With a term of less than twelve months, the transfer costs are still 0.5 percent.
Less enjoyable would be if the borrower gets into a financial predicament. There are certainly institutions that allow their customers informally one or two installment breaks a year. Especially families with small children like to use this option in the pre-Christmas period. If the option is for two installment pauses a year, at least three installments must have been paid in between.
What special features are there?
A loan with a term of 120 months is basically no different from a loan with a maturity of 48 or 60 months in terms of creditworthiness requirements and the application process.
The ever-changing application modalities are also effective for a term of 120 months. More and more banks are banking on a digital application process. This ideally includes the VideoIdent procedure from home instead of the PostIdent procedure. The Applicant may allow the Bank one-time access to its checking account during the application process. This saves him from having to photocopy salary statements and account statements and send them to the bank. Finally, the electronic signature is becoming more and more prevalent. This eliminates the printing of the application and also the postal consignment.
The digital loan application offers on the one hand significantly more comfort, on the other hand it speeds up the payment of the desired amount of money considerably.
Online credit comparison 120 months – conclusion
A loan with a term of 120 months offers advantages, provided that premature full or partial repayment without a prepayment penalty is part of the loan agreement.