If you have to take out a high loan, you also have to pay high monthly installments. It looks different if you opt for a loan with a term of 120 months. Compared to a loan with a term of 72 months, the rates drop to a level that most can still easily afford on a monthly basis.
When should you choose a loan with a term of 120 months?
This varies from borrower to borrower and especially from loan amount to loan amount. So it certainly does not work and the banks will not grant such a loan if you only want to take out a small loan of USD 3,000.00 or USD 5,000.00 and repay it in 120 monthly installments.
Then the costs and interest for this are higher than the actual loan amount. However, if you have to raise a large amount and the monthly cash receipts from salary, unemployment benefit or pension are not quite as high, then a loan over 120 months can be worthwhile. Home finance is also usually offered over a long term of up to 120 months. However, one should always bear in mind that monthly installments have to be paid back to the bank or credit institution over 10 years.
Interest rates are higher than with a loan with normal terms
You also have to be aware that with a loan with a term of 120 months, the interest and costs that you have to pay for this are significantly higher than with the same loan amount with a normal term of, for example, 72 months. Here it can happen that you have to pay double the interest and costs when you apply for a loan of 120 months.
However, with a large loan amount, the monthly installments are still in a more bearable range, despite the higher interest and costs than if you wanted to repay the amount in 72 months, for example. Here you can certainly speak of a monthly difference of up to USD 300.00, which you pay less if the term is longer. Therefore, you should definitely weigh up beforehand whether you are ultimately willing to pay more costs and interest, but the burden for the month is not so high.