How long should the loan term be?

The optimal repayment term depends on two factors:

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The monthly installments can be paid easily. However, the repayment amount should be calculated as high as possible. Any reduction in monthly contributions leads to an increase in interest costs. However, a small financial reserve should always remain around emergencies and changing ones
To compensate for income relationships.

The repayment term does not exceed the useful life of the financed property. If the loan runs longer than the object can be used, this can become a significant problem. This topic is especially relevant for vehicles. If a car loan runs longer than the vehicle is functional, the borrower pays the loan even if no car is available. He receives a new vehicle loan then only in the rarest cases. Especially if he needs a car for his work, this can be a significant problem. Since an accident can also lead to this situation, all financed objects should be adequately covered by insurance, at least during the repayment period.

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When choosing the loan term, borrowers should also pay attention to their life planning. If there are major changes, such as starting a family or a pension, the monthly repayment installment must be calculated more carefully.