The Advantages of Long-Term Debt

• Most long-term debt is used to purchase a home.house image by hans slegers from Fotolia.com
  
  A long-term debt is any type of loan that extends longer than five years. The benefits from this type of debt need to be weighted against the disadvantages. It is important to note for any borrower than the longer the term of the loan, the more interest is paid over the life of the loan. Therefore, the borrower should consider getting the shortest term that he can afford to lower the overall interest paid throughout the life of the loan.
  
  

Lower Monthly Payment

• If a borrower is looking to make a significant purchase for tens, if not hundreds, of thousands of dollars, it is in his best interest, budget-wise to purchase a long-term note. The longer the note, the lower the monthly payment on a debt. Additionally, even if the borrower picks the longest term possible to get the lowest possible payment, he can make additional payments to pay off the loan faster, if there is no pre-payment penalty.
  
  

Bigger Loan Amount

• In addition to having a lower monthly payment, the borrower may be able to qualify for a large debt than originally thought if the payment is spread out over a longer term. A borrower's debt-to-income ratio, the amount of monthly debt payments versus his monthly income, is the biggest factor in loan approval, aside from a credit score. If the longer term lowers the monthly payment, the borrower may be able to up the loan amount with an even longer term.
  
  

Impact on Credit Score

• The older the debt on a borrower's credit report, the better its positive impact on his credit score. If the debt is carried over several years and is paid on time, the effect on his credit score is positive, which allows the borrower better financing options on other debts.