This term of the loan may be five or more years. Basically, these loans are used as investment capital.
Understanding the long-term lending.
Currently, long-term loans, banks can issue the following purposes: – for individuals – for the purchase of property or for the construction of the house. So, for example, mortgage loans may be granted for a period of 10 to 30 years;
– for legal entities – to create new capacities, reconstruction or modernization of production lines, to invest in the acquisition of fixed assets, the financing of investment projects, and more.
In most cases of long-term loans provided by real estate. On the part of the banks, this is due to the high risk of loan repayment is not. Also, the bank may require from the client and guarantees of third parties, or other types of collateral.
Depending on the transaction structure of long-term loans can be in two forms:
1. The credit line (which is a credit settlement account of the borrower within the established limit).
2. Commercial loans (a loan that is provided in the form of a preliminary advance payment, installment or deferred payment for services rendered, for goods sold, for the work performed).
Usually, the application served clients for a long-term loan, considered a little longer than with applications .
short-term loans what is the difference between long-term lending from short-term loans?
The first is the loan terms. In the short-term loans – terms ranging from one to three years, and for the long – more than five years. the second, it is the interest rates. Thus, interest rates on long-term loans are lower than for short-term loans. Third, there is the presence of collateral or surety. Short-term loans, in most cases can be issued without collateral and guarantees. In – Fourthly, the decision to issue long-term loan the bank takes longer than on short-term loans.