Loan term: a lower instalment through a longer term

The loan term is the period over which the loan is repaid and is a decisive factor in the loan. To prevent payment difficulties in advance, the right term must be chosen so that the monthly instalment stays low enough to manage easily.

Anyone who wants a loan with small instalments can influence the instalment amount by choosing the term. The longer the requested loan term, the lower the monthly instalment.

Long loan terms therefore reduce your monthly burden. By contrast, total costs rise with a longer repayment period. The monthly instalment, however, stays at a moderate level.

The right term and instalment for your loan

The maximum period for loan repayment is 120 months. Instalment loans with such a long term are harder to oversee and lead to higher total costs, but they still bring several advantages. Above all, the monthly instalment stays particularly low. The monthly burden is therefore easier to manage than a higher instalment over a shorter term.

Being able to pay the monthly loan instalment on time without problems is especially important. If payments are late, default interest is added. Such payment delays are also registered with SCHUFA and therefore affect credit scoring. Both can harm future loan applications and may even lead to them being rejected.

To avoid such payment difficulties and the consequences that go with them, a longer loan term with a lower instalment is well worthwhile. A long term does not necessarily have to mean higher total costs than a shorter one. You can at any time pay more than the contractual monthly instalment or repay the entire remaining amount early. The interest that would still have fallen due is then refunded and therefore saved. This way the total costs that would have been comparatively higher because of a longer term can be reduced, without taking the risk of payment difficulties on a shorter-term loan.

How high can my loan be?

Draw up a household budget. All income and expenses should be listed. Besides salary, other income such as child benefit and interest income should also be included. On the expense side belong items such as rent, utilities, insurance and a general lump sum for unexpected costs. By subtracting expenses from income you determine the monthly surplus. This is multiplied by 36 to determine the maximum loan amount that can be taken out.

Conclusion on the loan term

Before you apply for a loan, you should first determine your income and expenses and how much money you really have available each month. Do not calculate this too tightly and plan enough reserves so that unexpected events do not immediately cause payment difficulties. You can then apply for the loan with a term whose monthly instalment realistically matches your budget. You should only choose a short term if you are sure you can repay the monthly instalments without difficulty. The best approach is to use our loan calculator to determine which amounts and terms produce the monthly instalment that fits you, and then apply for your ideal loan directly.

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