What is the loan term?
The credit term actually only determines the time in which the loan taken out has to be repaid. However, there are some follow-up costs associated with the loan term, because the longer the term, the higher the loan amount. However, if the term is too short, the monthly charge can easily become too high.
What are the terms?
As a rule, the loans only run for a few years. The terms start at one year, but can be extended up to 10 years. It looks different with a real estate loan, however, here the term can be up to 30 years. However, the term has an impact on the interest rate. As the term increases, the risk increases. The employee could get sick or be unemployed. The bank’s capital has already been taken, so it can no longer be invested for the entire term. The bank will therefore charge more interest if the term is long. A shorter loan term significantly reduces the cost of the loan.
Consider the income
Which loan term is chosen depends on the monthly repayment rate. A short term does not always have to be an advantage, because sometimes the borrower simply cannot afford the high monthly burden. It is important that you can always adjust the rate to your own financial situation. Before taking out a loan, income and expenditure should be compared realistically, because this is how you determine how high the repayment rate can actually be. Expenditures must take into account rent, energy costs, installment payments, food and clothing, and phone and cell phone costs. These payments should be calculated generously. A financial “buffer” should always be built in, life can change very quickly and you can then no longer pay the installments.
The term of the loans must be chosen cleverly, not too short so that the monthly installments can also be paid, but also not too short so that the loans are not too expensive.