Long-term Debt

If you purchase a home and have a mortgage, that is considered long-term debt. Your mortgage may be paid off in 15, 25, 30, or even 40 years, depending on the type of loan. Financing a car is also considered long-term debt because you typically have from 36 to 72 months to pay off your car.

When you finance a car, the payments should not extend over a longer period than you expect to keep the car. Many people buy cars every three or four years. However, if they have a 72 month loan, they will not have paid off their old car prior to purchasing a new car. Many people allow the dealership to roll their previous car's loan balance into their new car loan, which can lead to financial hardships in the long run. Essentially, this means that the car buyer will still be paying for the old car as they drive the new one. Some financial advisors say that if a person cannot pay for a new car within three years, then it is too expensive for his/her budget.

What type of debt do you think a student loan would be?

A student loan is considered long term debt because you are given longer than one year to pay it off. However, you can always make extra payments to any long term debt so that you can pay it off sooner. Doing so saves you money since you will pay less interest. For more information on student loans, visit the Federal Student Aid website.