A 7-year personal loan has many benefits over an ordinary loan. The extra-long repayment time means the bank can charge a lower monthly fee. Fixed interest rates also make these loans easier on your budget over time. If you are a bank customer looking to borrow a very-large sum or want a very structured payment plan, a 7-year personal loan may be a great choice for you. However, loans with such long repayment terms can cause problems. If you do not choose the right loan, you might end up paying far more in interest than a short-term loan. Additionally, there are bank policies with seven-year personal loans that might make repayment harder for you. Keep reading for the criteria you should look at when choosing 7-year personal loan.
Secured or Unsecured
As you look at a long term loan offer, check to see if it is secured or not. A secured loan will require you to provide collateral, such as land or other assets, for the loan. If you fail to repay the loan, the bank keeps the assets to mitigate the loss. Many 7-year personal loans won’t require this collateral. However, you are likely to get a lower interest rate in a secured loan. More so, you will need to have good credit to get approved for a non-secured loan. Consider whether a secured or unsecure loan is best before signing a long term agreement.
Many 7-year personal loans will include several incidental fees. These banks use the fees to secure their investment on such a long loan timeline. The most common fee a bank might charge you is an origination fee. This will be 1% to 6% of the total amount of the loan due at the time of signing. They may also charge you additional monthly or yearly fees. Read the fine print in the loan contract carefully and add any fees to the cost of the loan overall. This is a great way to avoid financial crisis. If the fees are too high, it might not be worth borrowing the money.
Interest Over Time
As you compare interest rates on loans, factor in how long you will pay. If you’re prone to having a poor credit card balance, this is a major factor to look into. 7-year personal loans often offer lower interest rates than their short-term counterparts. The problem is you’ll pay less over a much longer period. As a result, you may well pay more in interest then you would with the short-term loan. To avoid this, you need to take a careful calculation of the interest and other payments for the entire seven-year period. This will ensure you don’t get a bad deal over a long period.
You should consider whether the rigid payment structure will be beneficial. Some banks will not let you end a seven-year personal loan early. This means even if you have the money to pay off the loan after a few years, you will have to continue to pay off the loan on schedule. Other banks will let you pay it off early but charge you extra fees to do so. This protects the banks from losing the profit that they receive from your interest payments. If you think you might be able to pay off the loan early, check with the bank that you can do that.
As you consider a 7-year personal loan, consider the next 7 years for your finances. One of the big ways that people get into trouble with these loans is that they do not expect financial issues in their future. After five years, will you still be able to pay your monthly fees and interest? Take the time to consider where you are going financially. What are your plans? How will you pay fees if you lose your job? What’s your long-term career plan? If you doubt in the future you will still be able to pay, you are better off considering a short-term loan. Financial consulting can help you to ensure that your future financial state will be positive. No one can know the future, but without a good prediction a 7-year loan can be dangerous.
Considering the above criteria can mean the difference between a good 7-year personal loan and defaulting. Consider whether you want a secured loan with collateral or an unsecured loan. Check the loan for hidden fees that will drive up the cost. Look not just at the interest rate, but how much it will cost over the seven years. Determine if you need the ability to pay the loan back early in the contract. Consider your own financial future to determine if you can pay the loan for seven years. With these criteria satisfied, you will be ready to sign for a solid 7-year personal loan.