Long Term Loans: Ben Mathews T4 Mba

LONG TERM LOANS
BEN MATHEWS
T4 MBA
TERM LOAN
• In finance a loan is a debt provided by one entity (organization or individual)

to another entity at an interest rate, evidenced by a note, which specifies,
among other things, the principal amount, rate of interest and date of
repayment.
• A term loan is a monetary loan that is repaid in regular repayments over a
set period oftime.
LONG TERM LOANS
Long-term loans refer to those loans that have a longer tenure or repayment period.
Long-term loan repayment periods typically last 5 to 10 years
Long-term loans are sanctioned based on the regular income of an applicant and
generally require a continuous source of income as well as collateral to be submitted
with the lending bank
Such loans are used to cover various financial needs related to personal requirements,
business, wedding, home renovation, education, vacation, purchase of a vehicle, or any
other type of personal or commercial purpose.
ELIGIBILITY CRITERIA FOR LONG-TERM LOANS
Long term loans offer huge loan amounts and as such have stringent eligibility
guidelines. However, these criteria differ with different lending banks. Listed below
are some of the most common criteria that apply to almost all long-term loans.
Applicant should be aged between 18-35 years of age

Applicant should be earning a regular income
Applicants should be a resident of India
A guarantor is required to sign the loan application
DOCUMENTS REQUIRED FOR LONG-TERM LOANS
Certain documents needs to be submitted to the lending bank for approval of any long term
loan. The list of these documents differs according to the lending bank. Most banks require a
copy of the following listed papers.
Proof of permanent address

Proof of identity, passport, voter ID, driving license etc.
Income proof of co-applicant/guarantor
Optional guarantor form, duly filled
Bank account statements if required by the bank
Salary slips of the applicant
FEATURES OF LONG TERM LOANS
• High Loan Amount: Long-term loans are given for high loan amounts and are mostly secured in nature
except for standard personal loans. Hence, banks do not worry much about such loans as they already
have collateral that has the same value as the loan amount.
• Low Rates of Interest: Long-term loans are offered on low interest rates because the borrower has to
repay the debt over a long period of time and the banks also make their profits in the form of interest
over such long tenure.
• Repayment and Prepayment Options: Long-term loans come with a number of repayment and
prepayment options. Borrowers can pay the EMIs through ECS (Electronic Cancellation System), AD
(Auto-Debit), cheque or cash. This makes it easy for the borrowers to repay the loan as per their
convenience. Borrowers have the option of prepaying the loan before the completion of the loan tenure.
• Tax Benefit: Some long-term loans come with tax benefits. Long-term loans such as home loans are
eligible to reduce the taxable income under the Income Tax Act. Similarly, business loan repayments can
be shown as expenses in the account and help arrive at the actual profit, and thus, reduce the company’s
tax.
TYPES OF LONG TERM LOANS
• Home Loans: This can be considered as the most appropriate example of long-term loans. The tenure of
home loans goes far beyond 3 years. Usually, it goes up to a period of 15 years to 20 years and in some
cases even up to 30 years.
•
• Education Loans: These are the loans offered to students. The loan covers the tuition fee of the
applicant along with other necessary expenses required for and after the completion of their studies,
students are given a time period to find employment and start repaying the loan.
• Vehicle Loans: These are the loans provided for purchasing cars and two-wheelers. Car loans have seen
huge demand in recent years. The number of applicants and borrowers has also significantly increased in
the last decade. This is because of increasing purchasing power and improvement in the lifestyle
standards of people
• Personal loans: These loans are usually unsecured loans that are offered for covering the personal
expenses of the borrower. Borrowers do not need to keep anything as collateral in these loans as they are
granted these loans according to the past credit behaviour and financial capability of the applicants.
CONTINUES……
• Small Business Loans: These loans are offered to both businesses and individuals. Small
business loans are offered by all the major public and private sector banks in the country.
These loans can be sanctioned for purchasing new equipment, expanding a business or for
setting up a small business unit. The tenure of such loans depends largely on the loan amount.
• Long-term Payday Loans: Payday loans are small loans that are offered with high interest
rates on the condition that the borrower is liable to pay the loan as soon as he receives his
wages or salary. Such loans can also be long-term loans
CONCLUSION
Long-term loans enable you to expand the operations of your company, acquire
fixed assets and invest in major projects, whose payback period will arrive some time
in the future. Investment loans can be used to acquire fixed assets or make other
major long-term investments. A start-up loan makes launching a business and involving
external capital easier and less risky for entrepreneurs.

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LONG TERM LOANS

• In finance a loan is a debt provided by one entity (organization or individual)

Applicant should be aged between 18-35 years of age

Proof of permanent address

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