QandAs: Legal

What is Long Term Debt?

Answer:
Long term debt is anything that has a final

due date more than a year away. This can include mortgages, bonds, capitalized leases or other long term loans. It is debt you plan for over several years and not something you work on paying off in the short term.

Interest rates on long term debt are generally higher than bills due sooner however the advantage of long term debt is that it is not subject to interest rate hikes over the life of the debt.

Borrowers who continually refinance short term debt face the risk of having rising interest rates every time they redo their loans. Long term debt is more stable and allows the borrower to better plan their financial future.


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