Things To Know About Long-Term Loans

When you borrow money from a lender, you are taking on a risk – and so is your lender. That’s why a loan’s repayment terms and conditions are typically meticulously spelled out. Some loans are short-term and can be repaid within 36 – 60 months (3 – 5 years).

On average, long-term personal loans have repayment terms of 72 – 120 months (6 – 10 years). Some long-term personal loans can be repaid in 180 months (15 years).

Long-term loans may have lower monthly payments than short-term ones but are harder to qualify for and riskier.

If you’re wondering whether a long-term loan is worthwhile, we’ll tell you everything you need to know.

What Is a Long-Term Personal Loan and How Does It Work?

A personal loan with repayment terms of five or more years is considered a long-term loan. A long-term loan may be repaid monthly, annual or semiannual and can include a balloon payment at the end of the term. Sometimes, paying off a long-term loan early results in a prepayment penalty.

What Should You Consider Before Getting a Long-Term Personal Loan?

When looking into a long-term loan, it’s essential to consider its annual percentage rate (APR), which is the yearly interest applied to a loan’s balance. The higher the APR, the more you’ll spend because you make payments over an extended period.

For example, if you took out a $50,000 loan at 10% APR with a repayment term of 120 months (10 years), you’d pay $29,290 in interest.

Amount Financed: $50,000.00
Payment Every Month: $660.75
Total Interest: $29,290.44
All Payments and Fees $79,290.44

If you repaid the same loan (with the same terms) in 60 months (5 years), you’d pay around $14,000 in interest – a savings of almost $15,500.

Your payment would be higher with the shorter, 60-month loan – $1,062.35 monthly. But if you can afford a higher monthly payment, you’ll save on interest payments with the shorter-term loan.

What Are the Benefits and Drawbacks To Getting a Long-Term Personal Loan?

Are you struggling with a mountain of debt from high-interest credit cards? Consolidating your debt with a personal loan – even a long-term one – might result in paying less out of pocket every month. It would likely be cheaper than only making minimum monthly payments on your card(s). If your bills are piling up faster than you can pay them off, a long-term debt consolidation loan may help you improve your cash flow while you reestablish your finances.

To know if this type of loan is right for you, you’ll need to understand the pros and cons of long-term personal loans.

Lower monthly payments with longer consolidation loans

You can bundle your debt into a single monthly payment. Because of the extended length of the repayment term, you can take your time paying off your debt with low, affordable monthly payments.

Better interest rates than credit cards

Credit card companies traditionally charge higher interest rates than what you may get offered with a long-term loan.

Unpredictable future

Do you know what your finances will look like in 7 – 10 years? We all hope to be financially secure, but our situations can change. Not knowing what your finances will look like in the future adds an element of repayment risk to long-term debt.

Stricter approval process

Long-term personal loans are harder to get. You may not qualify for a long-term personal loan if you have low credit scores.

More expensive

You would pay more in interest with a long-term personal loan than you would with a short-term loan. And if you decide to pay the loan off earlier, you might face prepayment penalties.

When Is It a Good Idea To Get a Long-Term Personal Loan?

If you need more time to pay off your debts and want to do it with low, affordable monthly payments, debt consolidation using a long-term personal loan might make sense – and there are other reasons to consider.

You may need to borrow money to pay for life-saving medical treatment or other significant expenses. In these cases, a long-term personal loan may make more sense than a high-interest credit card.

When To Avoid a Long-Term Personal Loan

A lender will run a hard check on your credit report and review your credit score to assess your eligibility for a long-term personal loan. If your credit score falls below 650, you likely won’t be approved for a loan.

If you’re not a fan of long-term commitments, a long-term personal loan may not be for you because you’ll be in debt for a long time. And if you experience any changes to your financial situation while you’re paying off the loan, your ability to repay the balance in full could be impacted.

A shorter-term loan may make more sense if you can afford a larger monthly payment.

Where Can You Find Long-Term Personal Loans?

Some banks, credit unions and online lenders offer long-term personal loans. When shopping for lenders, compare interest rates, loan terms and each lender’s qualification requirements. Consider getting prequalified from lenders before applying for a loan if you can. (FYI: Prequalifications won’t hurt your credit score.)

How Do You Apply for a Long-Term Personal Loan?

To apply for a long-term personal loan, you’ll need to:

  • Know how much you want to borrow: Figure out how much you need for your specific situation. This could be the total debt you wish to consolidate or the final cost of a medical procedure. While doing your calculations, include any associated fees such as loan processing or the cost to complete your application.
  • Compare loan options: Research and compare lenders and even alternatives to long-term loans.
  • Get prepared: The lender will require proof of identity and income.
  • Apply for the loan: Follow all required steps to complete the application process successfully.
  • Complete the process: Once you’re approved, you’ll sign your loan agreement, which will include your account information, your repayment information and your lender’s contact information. Store your documents in a safe place for future reference.
  • Schedule your first payment: If you can afford it, set up autopay to avoid missing a payment.

Are There Long-Term Personal Loans for Bad Credit?

If you have bad credit, it may take some time for your credit scores to improve – but you have to start somewhere. If you have no credit or thin credit history, consider applying for a credit builder loan.

What Are Some Alternatives to Long-Term Personal Loans?

Long-term personal loans are uncommon because borrowers and lenders both take on increased risk. Fortunately, there are alternatives to long-term personal loans.

Home equity loans

If you are a homeowner, consider a home equity loan versus a personal loan. With a home equity loan, you can tap into the equity in your home to withdraw cash, and you’ll have an extended time to repay the loan.

You will receive a lump sum payment. And depending on the loan’s terms, the loan repayment period can last as long as 5 – 20 years. In some instances, you can stretch repayment up to 30 years.


A home equity line of credit (HELOC) works much like a credit card because it operates as a revolving line of credit. Like a home equity loan, your home acts as collateral for the loan. However, a HELOC may offer a lower interest rate. This could make it a better option than a long-term personal loan. Depending on how you use the funds, you may even qualify for some tax benefits.

Credit cards

Some credit card companies offer competitive interest rates and promotional APR offers. Using a credit card wisely can be one way to meet your financial needs without going into long-term debt. But, remember, promotional APR offers have time limitations. So be sure to pay off the balance before the promotional period ends. If not, you could be stuck with a higher interest rate than what a personal loan would have offered.

It’s a Long-Term Commitment for Your Monthly Budget

Long-term personal loans are an option for consolidating debt and borrowing large sums of cash.

Long-term personal loans are … you guessed it: long. That means you’ll be in debt for a long time, and if your financial situation changes for the worse while you’re paying off the loan, you could run into trouble paying off the debt. But, of course, there are alternatives to long-term personal loans, and you should look into them.

Remember, a long-term personal loan should be a benefit – not a burden. So make sure the loan meets your financial needs and is a debt you can comfortably afford.

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Determining Your Credit Score

  1. Your credit score is a three-digit number that’s used to predict how likely it is you’ll pay back money you borrowed.
  2. The score generally ranges from 300 (low) to 850 (excellent). It’s calculated by looking at your previous credit history.
  3. You can check your credit report to find the number or use a free credit tool. You can also plug in your best guess.

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