Installment loans with a term of 120 months, offers from direct banks for this can be counted on the fingers of both hands. The financial check loan calculator we recommend still compares most offers. With Good Finance there is even a loan that can be taken out digitally.
On the credit comparison from E-Money, you can currently find (January 2019) four providers.
The General Civil Service Bank only grants loans to civil servants and to civil servants. These are typical official loans that traditionally make very long terms possible with low rates.
Just like the business policies of banks, the loan offers contained in the computers can change practically every day.
Why did so little credit offer from direct banks?
So why are there so few offers for direct loans with a 10-year term?
The answer is obvious. The typical direct loans are loans for small or medium-sized financing needs. To make normal purchases, borrowers need 10,000 dollars, maybe even 20,000 dollars. A residential loan is already taken out for 30,000 dollars.
With such loan amounts, long terms pay off neither for the bank nor for the borrower. Rather, it makes sense to roughly link the terms to the useful life of the object to be financed with the loan.
That is why direct banks usually only offer maturities of up to 84 months, sometimes up to 96 months. The average term for consumer loans is no more than 60 months.
For online loans, earmarked or for free use, there are standardized credit checks and collateral at direct banks. As a rule, for example, only the assignment of salary claims serves as security.
With very long terms, this security is actually not sufficient. Over a period of 10 years, the borrower can change a lot in his professional and financial situation.
The risk of default is simply too great for banks to grant the loan in a standardized, automated approval process.
Loans with high credit volumes and unusually long terms are more for branch banks. In such cases, the credit officers at branch banks will surely check the creditworthiness of their customers manually for each individual case.
On the other hand, the customer has the option of offering further collateral, such as pledging securities or life insurance.
Loans with a term of 120 months make sense?
Loans with a 10-year term for private use are actually only found more frequently in the area of real estate financing. Smaller 120-month loans are a rather unprofitable business for borrowers.
On average, banks charge higher interest rates for long-term installment loans than for loans with normal terms.
The average interest rate is currently around 6.9% for terms longer than 60 months, while it is around 4.6% for loans from 12 to 60 months. The examples listed here are of a theoretical nature. In practice, the numbers can look different, the interest rates can be lower or higher.
However, the examples clearly show how interest rates and terms change overall costs and that long terms are always associated with higher costs.
However, higher costs are often accepted in order to keep rates low. Extremely long terms are often chosen because otherwise, the loan is not payable.
Necessary net income
Banks determine the economic performance of their credit customers according to internal, generally unpublished, lending guidelines.
In it, the cost of living is assessed according to certain lump sums, and the attachable amount of the regular net income also plays a role.
The table below estimates which net income must at least be available. The borrower is said to be a family with a dependent child.
Both parents are employed, earn approximately the same amount and apply for the loan together. The loan amount is set at 20,000 dollars.
The example only takes into account the attachment table and no lump sums for living expenses. Pre-credits may require a higher net income.
This example is also theoretical and is only intended to give an idea of the income that is required for a loan of 20,000 dollars with the specified terms.
Many consumers have misconceptions about this. The starting point is the consideration that a family with a dependent child should at least have the seizure-free income for their livelihood.
This income should not have to be used for the principal. Banks can come to a different result within the framework of concrete lending. According to the bank’s guidelines, income requirements may be lower or higher.
Installment loans with a 10-year term recommended at all?
The question is what should be sensibly financed with such long-term loans, taking into account the principle that the duration of the expected useful life of the object to be financed should be adjusted.
From this point of view, smaller purchases and thus smaller loan amounts are out of the question. The useful life of a computer is perhaps three to five years, that of a normal motor vehicle for five to seven years.
Maturities of 10 years are only considered in the private sector when it comes to externally financing expensive purchases.
This can be, for example, a luxury body or a particularly expensive work of art. But mostly it will be about home furnishings, measures on an existing property or the purchase of a property.
Another use case can be major debt restructuring, such as combining several loans into one loan, for example as part of a debt restructuring. Often, however, there are special loan options with interest that are cheaper than those for normal installment loans, especially for all these applications.
Many banks provide earmarked housing loans for construction work on a property and in some cases also for the financing of home furnishings. As a rule, an entry in the land register is not required. Only the intended use often has to be proven.
However, even such loans are often not possible with the extremely long term of 10 years. An alternative is mortgage loans, which can be taken out both for construction work and for the purchase of a property.