With a cheap loan, consumers can fulfill a long-cherished dream or bridge a financial bottleneck. In particular, on the Internet there are a variety of different financing options for consumers. Of course, when deciding on a particular bank and a loan, the level of the loan interest rate is an important selection criterion. When taking a loan, consumers should the role of the repayment term not neglect, however. The duration of a loan is the period of time between the payment of the sum by the bank and the complete repayment of the loan by the debtor.
For normal installment loans, the repayment term is usually given in months – most banks offer consumer loans with a term of between twelve and 120 months. Some types of loan, such as the dedicated car loan, are limited to a maximum of seven years and 84 months, respectively. Due to the high loan sums, the period between the payment and the full repayment on mortgage lending can take up to 50 years.
Before deciding on a particular loan offer, consumers should think carefully about how quickly they want to be debt free again. The length of the repayment term is determined by the amount of the loan, the creditworthiness of the debtor and the monthly repayment installment. The more customers can repay the debt every month, the shorter the repayment term will be. However, if the monthly loan installment is too high, there is a risk that the debtor will not be able to raise the repayment installment and thus default in payment. Basically, consumers should try to keep the term of the loan as short as possible.
To determine the optimal repayment installment, the bank draws up a household bill using various documents from the client. For this purpose, all regular income and expenditure of the customer are compared and determines the financial latitude of the consumer. Most banks now offer their clients the option to change the loan term even after the loan agreement has been concluded: Should the debtor’s financial flexibility change during the repayment period, the term can be shortened or extended as required. But be careful: When the term is shortened, the borrower usually incurs high costs in the form of prepayment penalties.