Decoding the features and benefits of Long Term Loans and advances
Do you want to buy a house? Do you want to fund your education? Are you starting your venture and need a business loan? If yes, the answer to all your questions is a Long Term Loan. Offered by banks and Non-Banking Financial companies, this loan comes with several attractive features. Let us decode Long Term Loans in this article.
Long Term Loans are secured loans that allow you purchase high-ticket items with the loan amount. This loan comes with significantly higher repayment tenures, and you can repay it over an extended period of time, usually ranging from 3 years to 30 years. Examples of long-term loans include Home Loans, Car Loans, Two-Wheeler Loans, Personal Loans, Small Business Loans, to name a few.
Long-term loans come with higher loan amounts since the products purchased through the loan are generally expensive.
Lenders typically offer lower interest rates to loan applicants since the loan repayment tenure is higher.
Lenders need security or collateral on Long Term loans. Typically, you have to pledge the item purchased through the loan as collateral. The collateral enables lenders to recover their investment if a borrower defaults on loan repayment.
Lenders allow you to repay the loan in Equated Monthly Instalments (EMIs). Each EMIs comprises a portion of the principal amount and the interest component.
Certain Long Term loans with advances come with tax benefits. The best example is a Home Loan, where you can claim tax deductions of INR 150,000 under Section 80C of the Income Tax Act, 1961, on the principal loan repayment. Similarly, you can avail of annual tax deductions of INR 200,000 on interest repayment under Section 24B.
To be eligible for most Long Term Loans, you should be a resident Indian, salaried or self-employed individual in a specific age group as determined by the lender. Some lenders may also ask you to have a guarantor back your loan application.
Home Loan tenures tend to range from 10 to 30 years. The house that you buy acts as collateral until you repay the loan. Home Loan amounts tend to be extremely high. Therefore, borrowers can choose a longer repayment term with decent EMIs.
An Auto Loan can be used to buy a car or a two-wheeler. The minimum and maximum tenure of an Auto Loan is 3 and 7 years, respectively. You can get this loan at significantly lower interest rates.
If you intend to set up your business or expand it, you can opt for long-term business loans with 5 or more year repayment tenures. These loans may double as Long Term Personal Loans, where you must pledge your business as collateral.
With so many types of Long Term Loans, you can get financing for all your needs. With a financial product like a long-term loan, you can buy things in affordable EMIs and repay the loan flexibly.
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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.