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Do you want to establish a business of your own, but fall short of cash? There are many expenses that require a pot full of cash, but often people give up the idea due to short of cash. Well, it’s really unfortunate to give up the idea of establishing a business, buying a car or investing in something that needs huge amount of cash. If you are someone who is facing the same situation, then you do not need to worry as long term loans are here for your help.

Long term loans deliver a convenient way for getting additional finances without having to compromise or curtail other expenses. This lending option provides the way to fiscal aid that facilitates one to afford a number of additional necessities.

As mentioned above this financial help can be used for a number of purposes, some of them are renovating home, consolidating a past debt, purchasing a car or so on. The amount of loan depends on the various needs of the people. Repayment periods are affordable yet flexible to help the loan seekers convene the expected installments on time.

Long term loans can be availed in two formats, the secured and the unsecured form. The secured long term loans cater to those borrowers who own a house of valuable assets. The amounts borrowed in this type of lending option are high & since the money lenders receive a form of collateral through the person, the rate of interest are cheap. Long term loans in unsecured form are kept security free and lenders charge quite higher interest rates for them.

The terms and conditions involved in long term loans vary from one lender to another. Usually the terms include a good fiscal profile and stable source of income. However, those with imperfect profile can also apply for this loan from those lenders who sanction such loans.

The application process for long term loans has been made simple and fast with the onset of the internet. The loan seeker may browse through various sites and once a specific money lender has been discovered, the loan request form given on the particular site is needed to be filled and submitted. In order to get qualified, one needs to be a permanent resident of UK with age 18 or above. It is mandatory to have a bank account that too in active form. Employment details and fixed salary per month are also required.

To Fix or Not to Fix?

If you are about to buy a house or you are about to refinance your home or investment loan you may be asking yourself, should I fix my loan or not? Everyone wants to choose the perfect home loan and so, no one wants to commit the mistake of choosing the wrong loan rate type. The question is more important especially now with interest rates being at an all time low.

To help you decide you need to know – what is the difference between a fixed rate and a variable rate home loan?

What are Fixed Rate Home Loans?

With a fixed rate home loan, you will have the assurance of knowing:

>> What your repayments will be over a set period of time

>> What your interest rate charges are over the life of the loan

>> That you have the ability to plan your finances and stick to your budget, even in times of economic uncertainty

>> That when interest rates rise, your repayments will not increase

>> That you do not have to contend with varying loan payment amounts that will fluctuate with interest rate movements

>> That you have the flexibility of locking in your fixed rate

What are Variable Rate Home Loans?

A variable rate home loan is a very popular product in the lending market and a very competitive product amongst the lenders/credit providers. A variable rate home loan allows you to:

>> Take advantage of falling interest rates when the Reserve bank decides to drop their official rates

>> Take advantage of inclusions such as, a 100% offset account, free additional repayments and redraw facilities

>> Take advantage of the equity you have built-in your home by taking a line of credit option

>> Make unlimited extra repayment each month so you can pay off your loan faster

Do You Want a Compromise between Fixed and Variable?

If you are uncertain between choosing between a fixed or variable interest home loan, you may consider a split loan. It is also known as a split rate loan. A Split Loan allows a mixture of security and flexibility, such as:

>> A portion of the repayments can be at a fixed interest rate, and

>> Another portion of the repayments can be at a variable interest rate

What will I lose by Fixing my Home Loan?

Here are the disadvantages of fixing your home loan:

>> Interest rate drops will annoy you – If interest rates go down below your fixed rate, you will be repaying more than the variable rate and you will not benefit from the rate drop

>> Can I make extra repayments? – Extra loan repayments are often not allowed if you have chosen a fixed rate, or may only be allowed with a fee. Variable rate loans usually allow you to make extra repayments at no cost

>> Break fees – Fixed rate loans may also have a break fee if you change or pay off your loan within a set period (e.g. if you sell your home)

>> No Repayment Holiday is allowed when you have a short-term financial difficulty

>> No offset account and no introductory rate are available to you

>> Cannot be used for business purposes, or building/construction loans or bridging or “off the plan” loans

Are there any Disadvantages of a Variable Rate Home Loan?

A Standard Variable Rate (SVR) home loan is one of the most popular loans available. However, you still need to make your own comparisons of the features, benefits and flexibility. Even though a variable rate loan is very popular, there are some disadvantages, such as:

>> The interest rate and repayments can rise or fall at any time

>> Changes in the interest rate are at the discretion of a lender and they are meant to be broadly in line with market condition

>> You cannot arrange a rate lock

>> You cannot pay Interest in Advance in some circumstances

How to choose theHome Loan that’s perfect for you?

It is very crucial to spend time in choosing fixed rate or variable rate. If you choose the wrong option, you will end up with an uncomfortable mortgage for a very long time. So, spend some time researching recent rate movements. If you think that the loan rate may increase in future, you can opt for fixed rate loans. And, if you believe that there are chances of further reduction in interest rates, you can select the variable rate loan.

It is also important to speak to a home finance expert who has thorough knowledge of both the fixed and variable interest rates available in the market. He/she will be able to guide you in a better way and will help you in structuring your home loan according to your needs.