Long-Term Loans 101: Know About Long-Term Loans in Cambodia

Long-Term Loans
Sovannarith Chea
  • Long-term loans in Cambodia offer access to significant capital for businesses and individuals over extended periods.
  • Understanding the various types of long-term loans and their repayment terms is essential for making informed financial decisions.
  • Carefully evaluating factors such as creditworthiness, interest rates, and loan terms can help borrowers choose the right loan for their needs.
  • While long-term loans offer benefits such as lower monthly payments and flexibility, borrowers should be mindful of potential risks and carefully manage their finances to ensure successful repayment.
ADA Cambodia
Table of Content

Introduction: Long-Term Loan vs. Short-Term Loan

Welcome to the complete guide to long-term financing “Long-Term Loans 101.” In this article, we are going to explain everything you need to know about long-term loans in Cambodia. A minimal capital of around USD 1000 is required to set up a business in Cambodia. However, the business will need more capital for their operation and other usage, which is why long-term loans come in. They serve as a foundation for big financial moves either by individuals or businesses here. These loans are not simply money borrowed but a way of making sure that one is secure in the future whether you are expanding your business, investing in new equipment or buying property. 

Just like when you’re figuring out how to make a free loan agreement in Cambodia, understanding long-term loans is important for anyone diving into the financial world here. We will analyze long-term loans starting from zero to hundred in this guide. 

If you are an entrepreneur looking for capital or just a person seeking a long-term loan, do not go away. Be assured that we will equip you with sufficient knowledge regarding your financial ability to handle any upcoming money matters. Let’s go!

Long-Term Loan

Understanding the Features of Long-Term Loans

In the financial world, long-term loans are a common feature that allows businesses and individuals to obtain huge amounts of capital for relatively longer periods. Unlike short-term loans, which must be repaid in a year or less, long-term loans offer more flexible loan repayment tenure, usually spread over several years. 

In addition to extended repayment periods, long-term loans typically come with lower interest rates, depending on the terms of the loan agreement. A fixed interest rate remains the same throughout the life of the loan, giving borrowers stability with their monthly payments. A variable interest rate, on the other hand, can fluctuate over time, potentially causing the borrower’s repayments to change. 

These loans are typically used for major investments, such as expanding a business, purchasing real estate, or financing large projects. For anyone looking to borrow money for a long period, it’s important to understand how long-term loans work. 

After understanding long-term loans, you’ll be better able to make informed financial decisions that fit your goals and circumstances. We will now begin exploring long-term loans together, giving us a comprehensive insight into this financial solution. 

By familiarizing yourself with the different types of long-term loans available, as well as their features and considerations, you can make informed financial decisions that align with your goals and circumstances. In the following sections, we’ll delve deeper into the various types of long-term loans in Cambodia. 

Types of Long-Term Loans

Long-term loans come in various forms of loans, each meeting different financial needs and circumstances. Understanding the different types of long-term loans available can help borrowers choose the best option to suit their requirements. Here are some common types of long-term loans

Types of Long-Term Loans


Mortgages, also known as home loans are long-term loans specifically designed for purchasing real estate property. They typically have repayment terms ranging from 15 to 30 years and may require a down payment. 

Business Term Loans

Business term loans provide businesses with a large capital that is repaid over a specified period, often used for financing equipment purchases, expansion projects, or working capital needs. 

Car Loans

A car or auto loan is a long-term loan used to purchase a vehicle such as a car, truck, or motorcycle. The repayment period for these loans usually ranges from 3 to 7 years. 

Long-Term Personal Loans

Personal loans are a type of unsecured loan that can be used for various purposes, including debt reduction, home enhancement, or large purchases. The terms of repayment for personal loans can differ but typically have a duration of 1-7 years. 

Student Loans

Student loans are long-term loans designed to help students finance their education expenses, including tuition, books, and living expenses. These loans typically offer flexible repayment options and may have extended repayment terms. 

Each type of long-term loan has its own eligibility requirements, interest rates, and terms of repayment, it’s therefore important to consider your options and choose the loan that best meets your financial goals and circumstances.

Advantages and Disadvantages of Long-Term Loans

Long-term loans offer several advantages and disadvantages that borrowers should consider before committing to a loan agreement. Understanding these pros and cons can help individuals and businesses make informed decisions about whether long-term financing is the right option for their financial needs. Below, we’ll explore some of the key advantages and disadvantages of long-term loans:


Lower payments per month: One of the primary benefits of long-term loans is that they typically have lower payments per month than short-term loans. The extended period of long-term loan repayment allows borrowers to pay off their debt over a longer period of time, which is more manageable.

Access to large capital: Long-term loans offer loan applicants access to large amounts of capital, which is ideal for funding large projects, investments, or purchases that have a significant financial burden.

Access to Large Capital

Predictable repayment schedule: Fixed-rate long-term loans offer borrowers a predictable repayment schedule, as the interest rate remains constant throughout the loan term. This predictability makes it easier for borrowers to budget and plan for future payments.

Opportunity for growth and expansion: Long-term loans can facilitate the acquisition of growth opportunities and the expansion of a company by providing the necessary funds for investments in equipment, infrastructure, or new projects.


Higher total interest costs: While long-term loans offer lower monthly payments, they often result in higher total interest costs over the life of the loan compared to short-term loans. Borrowers may end up paying more in interest due to the extended repayment period.

Default risk: Long-term loans have a higher probability of default for both borrowers and lenders because of the longer period of repayment. Economic downturns, changes in business conditions, or unexpected events can increase the likelihood of default, leading to financial challenges for borrowers.

Limited flexibility: Long-term loans are usually accompanied by stringent terms and conditions that define the borrower’s flexibility regarding changes or adjustments to the loan agreement. This lack of flexibility can be detrimental to borrowers who may need to alter their financial situation depending on new circumstances.

Overall, long-term loans have the significant benefit of lower payments over a long period of time, access to a large amount of capital, and a consistent repayment schedule. However, borrowers should be cognizant of the potential disadvantages, including higher total interest costs, requirements for collateral, and limited flexibility, before committing to long-term funding.

Interest Rates and Fees

Interest Rates and Fees

The interest rates and fees are crucial in the evaluation of long-term loans. These components together determine the total cost of the loan and have a significant impact on the potential affordability of the loan. Understanding the mechanism by which interest rates and fees are determined is crucial to borrowers who want to make informed decisions about finances. Let’s discuss the specifics:

Interest Rates:

Fixed interest rates: Some long-term loans have a constant interest rate, which remains the same over the course of the loan. Fixed-rate loans offer borrowers a level of predictability and stability in their payments that facilitates budgeting and planning for the future. 

Variable interest rates: Alternatively, long-term loans may have a constant interest rate, which is based on the market. While initial rates that are variable are less than the initial rate that is set, they can increase over time, which would lead to a higher monthly payment compared with a smaller monthly payment. 

Annual Percentage Rate (APR): The APR is calculated by taking the total cost of borrowing and adding in any associated fees. borrowers should pay attention to the APR when evaluating loan offers, this will allow them to determine the affordability of the loan. 


Prepayment penalties: Long-term loans may include prepayment penalties, which are fees associated with the borrower who pays back the loan before the intended maturity date. These penalties discourage early repayment and can add to the overall cost of the loan.

Late payment fees: Borrowers who pay late on their long-term loans may incur a late payment fee. These fees are typically assessed as a percentage of the overdue payment amount and can accumulate over time if payments remain outstanding.

Other fees: Depending on the loan service provider in Cambodia and the specific terms of the loan contract, borrowers may incur additional fees, such as the appraisal fee, the closing cost, or the maintenance fee. It’s essential to review the loan terms carefully to understand all potential fees associated with the loan.

By understanding the effect of interest rates and fees on the cost of borrowing, borrowers can be more informed when choosing a long-term loan. Comparing the offers of loans, talking about the terms, and reviewing the agreement can help borrowers secure beneficial terms that correspond with their financial goals and situation.

Repayment Terms for Long Term Loan

Repayment Terms

Some 2.1 million Cambodians have an outstanding debt with a microfinance institution, with an average remaining balance to pay of US$4,476. So, understanding the repayment terms of a long-term loan is crucial for borrowers to manage their finances effectively and ensure timely repayment. Repayment terms outline the schedule and conditions for repaying the borrowed funds, including the frequency of payments, the duration of the loan, and any additional provisions. Let’s explore the key components of repayment terms:

Loan Duration

The loan duration refers to the total length of time over which the borrower is expected to pay off the loan. Long-term loans often have repayment periods ranging from several years to several decades, depending on the type of loan and the terms of the agreement.

Grace Periods

Some long-term loans may include a grace period, during which borrowers are not required to make payments towards the loan. Grace periods provide borrowers with temporary relief from payments, typically after the loan is disbursed or during periods of financial hardship.

Amortization Schedule

An amortization schedule describes the composition of each monthly payment, the amount of the payment that goes towards the principal is described, and the amount that goes towards interest is described. This schedule facilitates the borrower’s ability to follow the progress of their repaying the loan and understand the remaining balance.

Early Repayment

Some long-term loans may allow borrowers to pay back the loan before the scheduled payback date without having to pay a prepayment penalty. Early payment can help borrowers avoid interest costs, but it’s significant to review the contract’s terms in order to understand any limitations or fees associated with early payment.

By understanding the repayment terms of a long-term loan, borrowers can effectively manage their finances and ensure they meet their obligations under the loan agreement. It’s essential to review the repayment terms carefully before agreeing to a loan to ensure they align with your financial goals and capabilities.

Factors to Consider Before Applying for a Long-Term Loan

Before loan application for a long-term loan, it’s good to consider several factors to ensure that the loan meets your financial needs, with these key factors, you can choose the right loan for your situation. Here are some factors to consider before applying for a long-term loan:

Credit Score and History

The credit score and credit history of your credit plays a significant role in determining if you can receive a long-term loan with a specified interest rate. Loan providers utilize this information to assess your credit scores and assess the risk of lending to you. Before applying for a loan, inspect your credit report and take steps to enhance your credit if necessary.

Credit Score and History

Business Plan Evaluation

If you’re applying for a business loan, the lenders will often assess the potential for success of your business and the capacity to pay back the loan. Ensure that your business plan is extensive and describes your objectives, market analysis, financial estimates, and methods of success.

Collateral Assessments

Many long-term loans require collateral to pay for the loan, this may include real estate, equipment, or inventory. Before applying for a loan, consider whether or not you have enough collateral to offer and the potential consequences of not paying back the loan.

Collateral Assessments

Loan Provider Reputation and Customer Service

Research loan providers’ reputations, customer reviews, and customer service offerings before choosing a loan provider. Look for a reliable loan provider with a track record of reliability, transparency, and excellent customer service like ADA Cambodia to ensure a positive borrowing experience. 

Case Studies: Examples of Long-Term Loans Work

Case Study 1: Business Expansion

Company Name: X Tech Solutions

Background: X Tech Solutions is a software development company based in Cambodia. The company has been experiencing rapid growth and is seeking financing to expand its operations and hire additional staff.

Loan Type: Business Term Loan

Loan Amount: $200,000

Repayment Term: 5 years

Interest Rate: 8%

Case Overview: X Tech Solutions applied for a long-term business loan from ADA Cambodia to finance its small business expansion plans. With the loan funds, the company was able to invest in new office space, purchase additional equipment, and hire additional software developers to meet increasing demand.

Outcome: Thanks to the long-term loan, X Tech Solutions was able to successfully expand its operations and increase its market presence. The company experienced significant growth, resulting in higher revenue and profitability. By strategically utilizing the loan funds, X Tech Solutions achieved its expansion goals and positioned itself for long-term success.

Case Study 2: Home Purchase

Individual Name: Sarah Smith

Background: Sarah Smith is a young professional living in Phnom Penh, Cambodia. She has been renting an apartment for several years and is ready to purchase her first home.

Loan Type: Mortgage

Loan Amount: $150,000

Repayment Term: 25 years

Interest Rate: 6%

Case Overview: Sarah Smith applied for a long-term mortgage loan to purchase her first home. With the loan funds, she was able to make a down payment on a condominium in a desirable neighborhood in Phnom Penh.

Outcome: Thanks to the long-term mortgage loan, Sarah Smith was able to achieve her dream of homeownership. Owning her own home provided her with stability and financial security for the future. By making timely monthly payments, Sarah was able to gradually build equity in her home and secure her long-term financial well-being.

Conclusion: Get a Long-Term Loan Right

Ultimately, long-term loans are a lifeline for businesses and individuals in Cambodia, these loans provide access to significant capital that can be used to achieve financial goals. By considering factors like loan types, interest rates, and payment terms, borrowers can make decisions that are aware of their needs and desires. As the country’s economy continues to evolve, long-term loans will still have a significant role in the development of entrepreneurship, innovation, and economic advancement, this will benefit both the borrower and the entire country as a whole. If you are looking for more information about loan options from ADA Cambodia, you can contact ADA Cambodia for further support.

ADA Cambodia

Frequently Asked Questions (FAQs)

Is a longer term loan better?

It depends on individual circumstances and financial goals in Cambodia. Longer-term loans often offer lower monthly payments and flexibility in repayment, but they may result in higher total interest costs over time.

How to calculate long-term loans?

To calculate long-term loans, you’ll need to consider factors such as the loan amount, interest rate, and repayment term. You can use online loan calculators or financial formulas to estimate monthly payments and total interest costs.

Are long-term loans riskier?

Long-term loans in Cambodia can be riskier due to the extended repayment period, which increases the likelihood of changes in economic conditions or unforeseen events impacting repayment. However, with careful planning and risk management, long-term loans can be effectively managed to mitigate risks.

Want more knowledge about Loans? Check out our list of loan tips now!

About Sovannarith Chea

Sovannarith Chea, with over eight years in the loan business, is a trusted financial advisor in Cambodia. His expertise at ADA Cambodia has empowered many individuals to overcome financial hurdles. Sovannarith's personalized approach ensures that financial solutions are tailored to each client's unique circumstances, making dreams more attainable for the community he serves. Connect with Sovannarith at ADA Cambodia and take a step towards financial stability.

Leave A Reply

Your email address will not be published.