Long terms loans differ from short term ones with regard to the lenght of the payment period: usually, if the term life is longer that one or two years, we can speak of long term loans. These liabilities are, in most legal systems, defined as mortgages, cash loans, debentures and motor vehicle loans, among other types of loans. The usual elements of these loans are the basic features all loans share: interest, principal, term and other.
Cash loans represent loans offered to both companies and individuals, in order for them to fulfill their financial needs. If their payment period is longer than a year, we can speak of long term cash loans. They are commonly known as debentures in the corporate world, and they allow the user of the loan to finance different business needs like: business expansion, improvement, technology upgrade, production modernisation etc. Individuals can use loans like these for personal use: financing purchase of goods and services, for example.
Mortgages, on the other hand, differ in the fact that the payment period is much longer (spanning decades, usually), the interest rates are lower, and, most importantly, they are used as a way for the borrower to be a home owner. The purpose of a mortgage loan is purchase of real estate. Another important, crucial feature of a mortgage loan is that the loan is secured by real estate.
It can be secured by the real estate being bought buy the funds from the loan, or some other real estate. The important thing to remember is the fact the lender has the right to return his funds by taking possession of the secured property, if the borrower fails to uphold to loan contract terms.
The providers of monetary funds needed for mortgage loans are usually banks and other financial institutions.
Bonds are a certain type of securities which oblige the issuer of the bond, who is also the borrower, to return the borrowed funds with interest to the person who financed the loan, or the lender. This way, the borrower guarantees that the funds received will be returned. In most cases,bond secured loans have shorter payment periods than mortgages and are mostly used to finance investments, business activities and other expenditures. Other than regular bonds, there are bonds issued by governments, in which the state is the borrower of the funds and these are issued with, in most cases, fixed interest rates and legally defined terms.
Vehicle and property loans are loans financed by banks and other institutions with specific goals: to obtain permanent goods like motorcars, furniture, appliances and other property. They are given to individuals in order to assist the general public to purchase property of different kinds. The interest rates are usually a bit higher than with mortgage loans and the payment periods are siginificantly shorter.
A specific type of long term loans are educational loans or grants (sometimes called student loans). These are aimed at students in order to finance their education. The specific feature of these is the fact that the payment usually starts from the moment the student is employed and the interest rates are usually subsidized by the government.Learn More