Long Term Loans in India – Features, Benefits and Interest Rates
Long Term Loan
Long-term loans could be secured or unsecured loans that are repaid over an extended period of time. The tenure of such a loan could be as long as 30 yea₹ Some examples are education loan, car loan, home loan, small business loan, and long-term personal loans among other.
While the interest rate could vastly vary depending on the type of long-term loan and the lender, it generally tends to be lower than that of short-term loans. The terms of lending could also be more favourable than short-term loans, especially when considering secured loans. The interest rate on a long-term loan could be as low as 7.5% p.a. or even lower.
Feature and Benefits of a Long Term Loan
1. High Loan Amount
A secured long-term loan, backed by collateral, could get you an amount as high as a few crores. But that’s not to say that an unsecured long-term loan can’t fetch you a big amount. But the approved loan amount could depend on factors, such as tenure, your credit score, your employment type, and other conditions specified by the lender. Take Navi Instant Cash Loan for example. Depending on your credit history, default history, and monthly income, you could get an amount as high as ₹20 Lakh within minutes!
2. Low Interest Rate
While the interest rate on a long-term loan would be contingent upon factors, such as your credit score, default history, employment history, monthly income, or assets pledged (in case of secured loans), in general, they tend to be lower than short-term loans. Before applying for a long-term personal loan, car loan, home loan, or business loan, do check out the rate of interest offered by your lender, understand whether it is fixed or floating, and how your monthly installments are calculated.
3. Tax Benefits
Certain long-term loans, such as home loans and loans taken for pursuing higher education, can also get you tax exemptions. For home loans, you can claim tax deduction of up to ₹1.5 Lakh per year on the principal component of the loan.
Additionally, you can claim tax deduction of up to ₹2 Lakh on the annual interest under section 24(b) of Indian I-T Act, 1961. Similarly, Section 80E of the I-T Act allows you to claim tax benefits on the interest component of your higher education loan. While there is no upper limit on the amount you can claim as deduction in a financial year, the benefit cannot be obtained for more than 8 years.
4. Collaterals
For secured long-term loans, lending institutions require you to pledge a collateral as security. Usually, a secured loan is backed by a physical asset, such as the home (in case of a home loan), the car (in case of an auto loan), or the machinery purchased (in case of a business loan). But, it could also be something like gold (precious metal), a fixed deposit or savings account, financial or debt instruments (investments), or even certain life insurance policies, such as a whole life insurance policy, a money-back scheme, or an endowment plan. The value of the loan usually depends on the value of the asset pledged subject to loan-to-value (LTV) policies among other considerations. In case you default, the lender will have full legal authority to liquidate your asset and recover the loan.
However, long-term unsecured loans don’t require collaterals. But, the loan amount and the interest rate could depend on your eligibility.
5. Flexible EMI Option
Almost all loans with longer tenures come with the benefit of easy monthly installments (EMIs) Breaking down the loan amount into smaller monthly installments could mean:
- Pocket-friendly: More liquidity to manage your priorities and needs
- Better financial planning: Easier to plan your monthly budget and outflows
- Flexibility: Many lenders don’t charge a fee on foreclosure, partial prepayment, or full repayment. This means you could manage your liability according to your own convenience.
Purpose of Long Term Personal Loan
A long-term loan could be a secured loan, such as a home loan, car loan, education loan, business loan or an unsecured loan, such as a personal loan.
1. Home Loan
Home loans are usually used to purchase a new property, build a house or repair one. You could also get a home loan to reconstruct a home.
2. Car Loan
A car loan is used to purchase a car or a motorcycle. It is available for both new and pre-owned vehicles.
3. Education Loan
An education loan can be obtained for higher education expenses. You could get it for yourself, your spouse, your children, or someone you are a legal guardian to.
Disclaimer: The expenses covered, tenure, loan amount, and interest rate levied may differ from one lending institution to another. So, please do your research carefully before choosing an education loan.
4. Business Loan
A business loan can be availed of by a business owner to start a new business or expand an existing one. A business loan can be used to meet working capital needs, cover for a cash shortfall, explore new opportunities, buy inventory, upgrade equipment, or to create a contingency fund.
5. Personal Loan
A long-term personal loan could be used for anything – from travel expenses to emergency medical costs to business expansion to buying your dream gadget or car, or more.
Eligibility Criteria for Long Term Loans
The most common ones are:
- Age: 21 to 65 years
- Nationality: Indian resident or NRI
- Employment status: Salaried or Self-Employed
- In-hand salary of at least ₹10,000 per month or business revenue of at least ₹2 Lakh per annum
Disclaimer: The points mentioned here are simply indicative in nature. Navi takes no responsibility for their accuracy.
Documents Required for Long Term Loans
- ID proof: PAN Card, Aadhar Card, driving license or voter ID
- Income proof: Last 3 months’ Salary slips or 6 months’ bank statements.
- Business proof (if applicable): IT Returns, P&L statements, address proof, etc.
Disclaimer: The points mentioned here are simply indicative in nature. Navi takes no responsibility for their accuracy.
How to Apply for a Long Term Loan?
- Step 1
Download the app of your preferred lender or visit their website.
- Step 2
Go to the loan section, select your preferred long-term loan, and click ‘Apply’.
- Step 3
Fill in the required information.
- Step 4
Check your eligibility for the loan.
- Step 5
Complete your KYC and wait for validation.
- Step 6
Once your application is approved, the loan would be disbursed to your bank account.
Alternatively, you could also opt for an off-line loan application process. Please visit the preferred branch of your lender, complete the application, complete your KYC, and wait for validation. Upon approval, the money will be credited directly to your account.
For fast approval of your home loan or long-term personal loan application and instant disbursal, download the Navi app right now. The process is 100% paperless and hassle-free. In fact, you could borrow up to ₹5 Crore for your home at an attractive interest rate, starting at 8.74% p.a., and a flexible tenure of up to 30 years.
With our personal loan, you could get up to ₹20 Lakh instantly, at a competitive interest rate, starting at 9.9% p.a.
Interest Rate and Other Charges on Long Term Loans
| Interest Rate | 7.5% p.a. – 12% p.a. |
| Processing Charge | 0% – 3% of the loan amount |
| Stamp Duty | As applicable |
| Prepayment Charge | At 0% to 6% of the outstanding principal loan amount. |
| Interest on overdue EMI | At 2% per month of the overdue tenure |
| Swapping of cheque | INR 500 per instance |
| Other legal charges | As applicable and non refundable |
| Change schedule for amortization | INR 200 |
How to Calculate Interest Rate Amount on Long Term Loans?
Before opting for a long-term loan, find out more about the interest charged and your EMI obligation. This will help you plan your finances accordingly. Given below is the formula you can use to calculate the EMI for your long term loan.
E=P*R*(1+R)^n /[(1+R)^n-1]
where
- E= EMI
- P= Principal amount
- R= Rate of Interest
- n= Tenure of the loan in months.
Let’s look at an example:
Loan Amount: ₹10 Lakh
Rate of Interest (p.a.): 9% p.a.
Loan Tenure (Months): 72
Total interest payable: ₹2,97,872
Total amount payable: ₹12,97,872
Easy Monthly Installments (EMI): ₹18,026*
*Based on Navi Instant Cash Loan EMI Calculator
Calculate Your Personal Loan EMI
Loan Amount
Rate of Interest (P.a)
%
Loan Tenure (Years)
Years
Monthly EMI
0
Total Interest
Total Amount
Top Banks that Offer Long Term Loan
- Axis Bank
- HDFC Bank
- ICICI Bank
- State Bank of India
- Kotak Mahindra Bank
Final Word
In this age of digitisation and app-based lending, getting a long-term is quite easy. Moreover, if you have a good credit score or have a valuable asset that you are willing to pledge, you could be spoilt for options.
However, if you want superfast approval and disbursal, a transparent lending process, minimal documentation, flexible repayment options, attractive interest rates, and no processing fee, then look no further. That’s because Navi Instant Cash Loan is the way to go!
FAQs
Ans: In order to secure long-term financing, an applicant’s income is critical. Banks grant loans to consumers depending on a variety of factors, including regular income. The amount of a loan you are qualified for is determined by the size of your annual wage.
Ans: No, it is not. Long-term loans are available to business customers for a variety of objectives relating to the operation or expansion of their company. Business clients, on the other hand, will have slightly different documentation requirements and eligibility criteria.
Ans: In comparison to short-term loans, long-term loans often have lower interest rates. Long-term loans, such as mortgages, may also give customers the option of fixed or fluctuating interest rates.
Ans: Some good examples of long term loans are education loans, home loans, car loans, business loans and long term payday loans. Each of these loans might differ in terms of repayment tenure and eligibility criteria.
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