When you are seeing the long term loan from one side, you are blindsided. Every loan has a risk, even though it is very small. The long term loan is known for its lower rate than short term loan. You are interesting because you will not pay too much for the additional payment. The long term loan is so good with low rate which make people interesting to apply. But, it is not so good in interest costs.
The impact of the interest costs in the long term loan
Long term loans mean you will have longer repayment term. It will make you end up paying the more interest costs. It is one of the risks which you will get when you take the long term loan. The example could be seen from the total costs of mortgage loan. The HSH Associates shows that a $100,000 of 30 year loan at 5 percent has a total repayment cost of $193,255. It means that you will pay double for what you get when you do not make extra payments. Paying twice as much for the product could be a waste of money and it should be a consideration.
When you are applying for loan, you will see the rate first. It is because it will be the factor of how much you will repay for the loan.
The rate of the long term loan
You cannot deny that when you choose a loan you see the rate of it. It has been known that Long term loans have lower rates than the short term loans.It is even better when you compare it to the credit accounts and credit cards rates. The standard of the credit card rate ranges from 10 to 25 percent interest.
Even though, every credit card will have different policy about the rates, it means your credit card could be lower or higher than the rates of the long term loan. If the long term loan is compare to the home loan, it can be said that the long term has lower rate too. The home loan is about 3.5 to 5 percent based on the survey on July, 2012. When it compares to equity loans, it has similar rates. Then, the car loans are a little bit higher than usually but not so much.