Bank loans are often given an installment loan with a term of 120 months. Because 10 years is actually not too long a time to pay off a high loan amount. For example, if you decide to finance a property and you have a fairly high share of equity, the term is usually 120 to 240 months, i.e. 10 to 20 years. So this is definitely a usual term, which arises when the loan amount is very high.
Long term with a high loan amount
However, this form of financing with a long term is only recommended if there is really a high loan amount. Because the lower the loan and the more disproportionate the monthly installments, which lead to a very long term, the higher the interest rates that can be expected.
The installment loan with a term of 120 months is actually only suitable if the purchase is enormous and some equity is already available. One should calculate with the purchase of a property with at least 15 to 20 percent equity, so that one can expect favorable interest rates from the bank. The more equity there is, the more advantageous the bank’s offer will be. And of course, it is highly recommended to keep the runtime as short as possible.
Long terms have to be well thought out
An installment loan with a term of 120 months is therefore not suitable if it is a small loan. This would mean that the monthly installments are also very low and in principle this procedure only leads to the fact that one pays a significantly higher proportion of interest than the proportion that makes up the repayment. However, an installment loan with a term of 120 months or with a term of 10 years can also be very small if the amount of the loan is correspondingly high. Proportionality must always be appropriate here. A 10-year term does not always have to belong. With a loan of 500,000 USD or more, repayment would be very quick within 120 months.
An installment loan with a term of 120 months is not uncommon. You should be aware that a lot of things can change in your personal life and the rates should be calculated afterward. It is not uncommon for a couple to suddenly become a small family and, of course, suddenly less money is available for repayment. That is precisely why it is important to be as flexible as possible when the term is so long. Personal changes always cause a change in the financial situation.