Long-term loans are long in procedures and they are for big purposes (as all know very well). Longer the tenure, smaller is the instalment. Most of the borrowers try to get the maximum tenure. Later, if possible, they can pay the loan fast with big part payments or by paying off early. At least, there is an option due to more number of years. 20 years, 25 years, 30 years, whatever is the time. Bigger tenure, keeps the burden light on your monthly budgets. For sure, you also think in the same way.
However, getting the desired tenure is not easy always. There are many factors that come under consideration and they all are decisive. Age factor, income, loan purpose etc. But you know what, there is no need to be hopeless completely. There are some components that can help you get longer period in long-term loans if you know about them.
Lender with longest tenure according to your age is significant
For any particular loan of long-term, different lenders offer different maximum number of years. For instance – One lending company has maximum 30 years while the other has 27 years. Age factor is decisive and you need to find the lending company that is ready to go to maximum level on your age. For sure, a good deep research is required for this and that should not be difficult if you do it online. Already, all sorts of loans are available online through direct lending.
Loan type matters a lot
The type of loan you are applying for is the bigger reason than the age factor for the lenders. Different loans have different priorities. For instance – in a home loan, the lending company will consider your age. On the other hand, in a long-term business loan, the annual turnover is the key factor. If your business is earning great, your age is not a big constraint. But if the commercial profit is down, no matter how young is the business owner, the duration is sure to be smaller.
Employment status is also the game changer
Employed, self-employed, underemployed, unemployed all have the right to apply for loan. But how many of them will get approval and that too on the desired tenure? Perhaps, you know the answer already. Yes, the employment status is important.
Employed and self-employed can get loan approval and can struggle for a longer tenure. But underemployed and unemployed are prone to rejection. In fact, in case of self-employed, if it is a start-up business, things are different. You will get the funds but the tenure may not be according to your preferences.
The collateral and guarantor factor
Long-term loans are always backed by collateral. You may have provided the collateral but still tenure is smaller than required may be due to income factor or age factor. In that case, the best possible thing can be to arrange a guarantor too. This strengthens your capacity to afford the loan. The lending company needs a stronger repayment capacity and if you prove that, giving a longer tenure is not a big problem.
Income outgoing ratio is unavoidable
The long-term lending companies cannot miss to pay heed to the income-expenses ratio. Their final decision on tenure is always affected from this factor. Rent, grocery, maintenance money, etc. nothing can be left unnoticed. Those who earn big may think that they can get the maximum tenure due to a good fat income. However, the income-outgoing ratio comes here to interfere in the expectations with the actual reality.
Suppose, 60% of your earning is going in expenses and only 40% is left behind. In that case, you may not be able to adjust the instalment of a long-term loan. It should be vice-versa. Means, the income should be 60% and expenses should be 40% and then the lender can consider your demand on tenure. Still, there can be a concern. Some lenders consider 60:40 ratio good while some want 70:30 income-outgoing ratio.
Other debts on you leave vital impact
Oh yes, this one cannot be avoided. If you have other debts on your name, the loan tenure surely gets affected. If the long-term loan you have applied for is your first loan, definitely the tenure part can be taken in your favour. Multiple debts tell that you are paying multiple instalments and in that case, the number of years can be less than your expectation.
Never forget the above factors while you apply for a long-term loan either first time or next time. This can help you plan better on when to apply, how to apply and whom to apply.