Personal loans typically have repayment terms from one to five years. But if you need the lowest possible monthly payment, or as much time as possible to repay a personal loan, you may look for one that’s longer than usual.
It’s important to understand how a longer repayment term will affect the overall cost of a personal loan. Here’s a look at how long-term personal loans work, where to find one, and what to know about the pros and cons of loans with longer repayment terms.
While many lenders offer loan terms up to five years, some offer loans with terms up to seven years. Generally, long-term loans work the same as short-term loans. You’ll repay the loan in monthly installments on a set repayment schedule. But long-term loans usually have a lower monthly payment amount.
While having more time to repay a loan may sound like a good idea, there are caveats to consider. Long-term personal loans typically have higher interest rates than shorter-term loans, although if you have excellent credit you may be able to get a lower interest rate. Also keep in mind that because you’re stretching the time you take to pay back the loan, you’ll pay more in interest.
Here are two examples of what you might pay for a $10,000 loan with differing terms:
Three-year repayment term:
Seven-year repayment term:
A longer loan term can reduce your monthly payments, but you’ll end up paying more in interest over the life of your loan. When considering your personal loan options, make sure to consider which rates and terms work best for your needs.
Personal loans with longer terms typically are harder to find, but lenders may offer them for certain uses, such as funding home repairs or paying off medical bills. Some banks, credit unions, and online lenders offer long-term loans, but not all do.
When looking for a long-term personal loan, it’s important to shop around and compare lenders to find the best possible rate. Credible makes it easy to compare personal loan rates from multiple lenders all in one place.
Some of the best lenders for long-term loans are Credible partners. But it’s important to compare lenders so you find the best choice for your needs.
Each lender has eligibility criteria you must meet to qualify for your long-term loan. Most require good to excellent credit, so working to improve your credit score, offering collateral, or getting a cosigner can help if your credit doesn’t meet the lender’s minimum requirements. Here are some things you can do to improve your chances of qualifying for a personal loan.
To improve your DTI, pay down or pay off your existing debt (if possible) and don’t take on any new debt. You might also consider reducing your spending by purchasing only what you need.
As with any financial product, long-term personal loans have advantages and disadvantages.
When deciding if a long-term personal loan is right for you, consider factors such as your monthly budget and how much extra debt you can afford to take on. This ensures you make the best decision for your unique financial situation.
Suppose you want to make a large purchase or need a substantial amount of money to fund home improvements or pay off medical bills. In that case, repaying the loan over a longer period generally means you’ll have lower monthly payments, which may be easier to manage.
But because the payoff period is longer, you’ll accrue more interest than with a short-term loan. A personal loan calculator can help you get a better idea of the costs associated with a long-term personal loan.
Some lenders have minimum borrowing amounts for long-term loans. If you don’t have the regular income to make the payments, you risk defaulting on your loan, which can damage your credit for years.
You can learn more about personal loans and compare rates and repayment terms from multiple lenders using Credible.
If you need to borrow a large amount of money or require a longer repayment term, take a look at these alternatives to a long-term loan.
Credible makes it easy to see your prequalified personal loan rates in just minutes.