Long Term Loan is a type of loan used for financing projects and equipments or other investments that requires long term payback periods.
Most company’s capital projects and equipment purchase including personal home loans for individuals cannot be financed from the customer’s immediate cash flow or salaries in the case on individuals but from projected cash flow thus the need for long term financing from banks.
Payment of long term loan can be in installments of monthly, quarterly, half yearly, annually or as may be structured to align with business or personal cash flow.
Examples of long term loans includes Commercial Mortgage; Equipment Lease Finance; Project Finance; Operational Vehicle; Asset Finance, Personal Loan and all other loan types with repayment period of more that 1 year.
In financing your Long term loans, banks provides about 70 percent of the cost while the customer is expected to provide the balance of 30 percent as equity contribution. This and other financing conditions may however vary from one bank to another.
Long Term Loans For Individuals
1. Personal Loan
Personal loan is the most common type of long term loan it is designed mostly for people in paid employment/self employed with proven ability to pay and to assist them meet personal finance needs. Amount eligible to largely depend on salary or amount earned on regular basis.
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2. Home Loans
Home Loan – A loan arrangement where an individual secures a facility with the bank to either buy a property or build one. Some banks offers joint mortgage where spouses can combine their income to finance and jointly repay their mortgage.
The other variant of Home Loan is called, Home Equity Refinance. This is an arrangement where an individual secures a facility with the bank to take advantage of investment opportunity or for other purpose and use a property he already owns as collateral for the loan.
This arrangement does not require equity contribution. The banks only provides a percentage of the value of the property to the customer as loan.
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3. Home Equipment Finance
Home Equipment lease or assets finance is another type of long term loan, it allow an individual acquire home equipment and pay bank from his salary or cash flow from business over a period of 1 to 3 years or as may be structured by the bank. Like other consumer loans, amount eligibility largely depend on the customer’s ability to pay.
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4. Auto Loan
Auto Loans is one of the common type of consumer loans. It is designed for people in paid employment and businesses with proven ability to pay. Good cash flow is a very important criteria that will assist a customer’s request for bank loan to acquire new cars or vehicles of their choice for personal use. Amount eligible for also depends on ability to pay.
Long Term Loans for Businesses or Corporates
1. Commercial Mortgage
This is a finance option for companies to buy or build property/ies either for its use or commercial purpose. Organization that requires to relocate its office, buy or build for commercial purpose can key into this finance option. Repayment can be spread for between 1 to 5 years depending on the company’s cash flow and the bank’s policy.
2. Equipment Lease Finance
Organizations that requires funding for its machineries and equipment has this option to key into. Similar to Home Equipment Finance for Individuals and just like other long term finance, the tenure may be longer than 1 year and may not exceed 5 years depending on your bank’s policies and procedures.
3. Project Finance
Project Finance Facility Like Contract Finance Facility but will longer repayment period. Construction companies and commercial builders are those that takes advantage of this finance option. This finance option often comes with moratorium to allow construction to be completed if repayment source is from the project to be financed.
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4. Operational Vehicle Finance
Companies willing to acquire motor vehicle for its operational use can key into this product. The product also includes buying cars and other vehicles for official use of the top executives of companies. Repayment are spread over period of time that may not exceed 3 years depending on the policies of your bank.
5. Asset/Office Equipment Finance
This product was developed to assist businesses with the required funding for office equipment like furnitures, computers and other office equipping need. It allows the customer to free it cash flow for other immediate cash needs while spreading repayment on the assets acquired over periods of between 1 to 3 years.
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It is important to note that facility name; amount eligible to, tenure and other lending conditions may vary from one bank to another.
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