Long-term payday loans have become one of the facilities that can benefit us the most today. The fact that we can pay a credit debt several times allows us to keep the value of the installments to a minimum. In some cases, it is almost imperceptible, which facilitates payment. an elucidation on http://zallenmusic.com
Even more so if it is about investing in something like a business or a new company , since the long-term results can be very good and the credit will have been worth it. But it is also useful in many others, such as to finance the purchase of residential property.
What is a personal loan?
It is a financial product offered by banks, which lend money to the service applicant, without the need to prove its purpose , being a contract between the client and the financial entity.
This means that we receive a previously agreed amount, plus interest and then we must return the amount within a certain period of time , through a signed contract.
The personal loan is the most practical solution for those who need fast money and thus be able to invest in a purpose. Most of the time, they are requested to resolve an emergency, pay debts, withdraw credit card or a special check.
What are long-term payday loans?
They are a type of business financing in which the loan expiration date extends beyond one year and can even last up to 20 years (for example, commercial real estate loans). It is mainly used to finance long-term projects, such as business expansion, franchising, property purchases, equipment and other fixed assets.
What are the advantages of long-term payday loans?
Longer repayment period
With a longer payment period, we will not be so pressured to pay the total loan amount quickly. However, this does not mean that we should neglect the monthly payments and get them out of our mind. As it is a long-term expense, we will still need to have a plan to deal with the debt .
Lower interest rates
Long-term payday loans generally have lower interest rates than short-term debts . This is because the request for financing is much more rigorous, since it implies a greater risk and also more money. However, we must bear in mind that we will spend more on interest.
We can finance significant expenses
The goal of any business is profit, and with that, comes the ability to scale or grow. When we start a business, we cover many parts of the company. However, as our business grows, we will have to hire people to work with us.
The more our business scales, the more expenses we will have to cover, and some of them will be very expensive. For example, if we need to automate the production of a product, we will have to buy the machinery, which can come with a very high price. By introducing long-term payday loans, we will be able to finance the high-value expenses that this acquisition entails.
What are the disadvantages of long-term payday loans?
We must pay more in total interest
Even if interest rates are lower with long-term payday loans, we will still have to pay more in interest , because the amount we will borrow is greater than the amount that can be provided with short-term financing.
We must assess the individual situation. We may be paying more in total interest, but if the expense is an investment and leads to more sales (for example, buying machines to produce more units), then a longer-term loan is the best option to grow the company .
Limit monthly cash flow
Although the time to pay it will be longer, it is highly recommended that we make regular payments , since we do not want to spend more on interest. With regular payments, we can restrict our cash flow.
More rigorous application process
Since the amount of long-term payday loans is much larger than the amount provided by the loan in a shorter time, lenders will be at greater risk. To minimize that risk, the application process is more decisive in eliminating those applicants who do not have a credit history or the ability to pay the debt .
How to get a long term loan
Long-term payday loans are difficult to obtain for start-up companies. In general, only businesses established with some years of financial success are approved for long-term bank loans . For approval, our company must have a business plan and several years of historical financial statements in order to obtain financing of this type.
In addition, we have to prepare forecasted financial statements to show that we can pay. Before a small business looks for a long-term payday loan, you should always compare the cost of it with the lease of the asset you want to finance . The interest rates of a long-term payday loan are usually a few points higher than the interest rates of a short-term loan in a normal economy.
If we are aware of the preferential interest rate, we can add some points to that and find something close to the interest rate that the bank will charge us. Those few points will reflect how risky they feel to the company. The more risky it is, the more points it will add to the preferential interest rate . When assessing risk, banks will examine the 5C of the solvency of our company.
When should we obtain long-term payday loans?
When our business is solvent.
They are more accessible to companies that have proven themselves, increasing sales and having sufficient cash reserves that are characteristic of larger companies. As the lenders want to minimize the risk, they will lend to those who have the ability and the history of returning the money.
Small and newly created companies are at a disadvantage with this type of financing , since they do not have the history or credibility yet, because they have just begun.
Our need to borrow extends beyond one year
If we are requesting financing because our project will last several years, long-term payday loans are the best option compared to short-term credit . This is because they provide the amount and period of validity best aligned to the purpose of our credit.
We will not be able to buy real estate with a short-term loan , since we will have insufficient funds. In the same way, we cannot use a longer one to pay the salary of employees during the month, since we will end up spending excess funds unnecessarily.
Have an actionable payment plan for the long term
If we do not have short and long term plans to pay off our debt, we could have detrimental effects on the business . Irregular payments will end up making us pay more in interest, but if we keep regular payments we will not have to spend more.
5 questions to ask when comparing long-term personal loans
- What is the interest rate of the loan? This largely defines what our payments will be during the course. It is important to consider our interest rate when calculating what our monthly payments will be. In this way, we will know exactly what kind of interest rate we will have to aim for when we request it.
- Is the loan secured or not? Secured loans require collateral and usually have lower interest rates compared to unsecured ones, which do not require it.
- How much is the loan amount? The amount we can borrow depends on several factors such as our credit score, what we need the funds for, our ability to provide adequate collateral, annual income and monthly expenses.
- Can we pay the loan early? Payment flexibility can be important for us even if we want a long-term payday loan. We may get some cash and want to make additional payments or decide to pay it in full before the original payment date. For this we must find out before if we can do it without receiving penalty.
- What are the other charges and loan charges? We must review our contract to get a complete list of the charges we must pay. Some loans with longer terms have maintenance charges and other small charges that can quickly accumulate to make the credit much more expensive.
Choose between fixed and variable types
When we look for a loan, we can have the option of choosing between a fixed or variable rate . Each has its benefits, and some lenders even allow you to have a fixed rate near the beginning of the term of our application and change it to a variable rate later.