The installment loan term can be used to influence the amount of the respective installments. If you choose a short duration, the rates are higher and vice versa. The borrower should take into account that low rates usually entail higher interest rates, which makes the overall loan more expensive.
As banks fear a higher credit default risk over a long term, they offset this with a higher interest rate. If you want to save money when you take out a loan, you choose the installment loan term as high as you can, so you do not have to cover the current account month after month.
The Golden middle
Since there are no guidelines on installment loan maturity, debt advisers and consumer advocates recommend the golden mean. A credit for a trip should under no circumstances take longer than a year. Finally, the old holiday should be paid, if you want to travel next time. The terms for the financing of a car are different. Approximately five years are appropriate here. After five years, the small repairs on many cars start reporting.
Perhaps the brakes need to be replaced or other wear parts replaced, then the money is more needed for maintenance or new purchase. For consumer goods such as washing machines, freezers or televisions, professionals recommend that you no longer choose the installment loan term as a guarantee for the equipment. So normally 24 months, in some cases, the guarantee can be set to 36 months.
Real estate is the special case
Only with real estate financing does the golden rule look different. In periods of low interest rates, the interest rate commitment for the installment loan term should be as long as possible. Ten or twenty years are worth striving to benefit from the low interest rates for a long time. Experience has shown that banks are generous in renegotiating interest rates with increases in interest rates. The customer then finds it difficult to enforce a low interest rate and changing the bank is also difficult.