Get Personal Loan Rates
Personal loans have a range of repayment options, some with short 2-year terms and others with longer terms stretching out to 5 years or more. When you’re looking for long-term personal loans, many companies, like LightStream Personal Loans Review, offer terms of 10-year personal loan terms or, like Navy Federal Credit Union, terms as high as 15 years.
Before you take out a long-term personal loan, however, there are a few things you should know and consider.
What is a long-term personal loan?
A loan’s term is the length of time the borrower has to pay it back. Personal loans — most often unsecured loans offered by banks, credit unions, and online lenders — generally have short-term repayment limits of less than 5 years. The fewer years you have to repay a loan, however, the larger your monthly payments will be. To reduce that monthly payment burden, some people look instead for long-term personal loans of 5 years (60 months) or more.
To see the difference this can make in repayments, consider a $10,000 loan that has to be repaid over 3 years and has a 15% APR. That would require a monthly payment of about $347. If that same loan could be paid back over 10 years, the monthly payments would be only $161. There are a variety of popular lenders with loan terms of 5 years or more, including SoFi, LightStream, Citizens Bank, Rocket Loans, and Navy Federal Credit Union.
Lenders may restrict how funds can be used, but most can be used for expenses like:
- Home repairs
- Auto repairs
- Debt consolidation
- Major purchases
- Moving expenses
Long-term personal loan pros and cons
Every financial decision has positive and negative points. Let’s recap both the pros and cons of getting a long-term personal loan:
- Lower payments
- May have lower interest rates than credit cards
- Can improve your credit
- Allows you to borrow more and consolidate more debts
- Can facilitate a major purchase
- Higher overall interest paid through the loan term
- Prolonged debt burden
- Fewer lenders
- Longer opportunity to make credit-harming late payments
- Could have a higher rate than credit cards
When does it make sense to get a long-term personal loan?
A long-term personal loan generally makes sense for those who have good credit and who need to use the funds for expensive, but ultimately valuable, financial moves, like making home repairs or consolidating debt to save money. When you have a low credit score, however, the cost of the loan may become so burdensome that it’s only a good idea when it’s the only option to help during an emergency.
In general, you want to avoid taking out personal loans for discretionary expenses, like a vacation, simply because of the cost and debt burden it creates. It’s also a bad idea to get one if your financial situation has any instability, because not paying back the loan can result in a lower credit score, collections and even garnished wages.
How to find a 10-year personal loan
If you think a 10-year personal loan is right for your budget, explore lenders such as LightStream and Navy Federal Credit Union. But while 10-year and longer personal loans may be hard to find, 5-year loans are relatively easy to find. You can get 5-year personal loans with lenders like SoFi, Citizens Bank, Upstart, Avant, and Rocket Loans, among others. You can explore lenders on ValuePenguin here.
Before settling on a long-term personal loan, remember that debt is a burden in your financial life that requires constant attention and payments until it’s gone. With a long-term personal loan, you’re signing up for a longer burden than you otherwise would have. In addition, the long-term loan will be more expensive than a short-term loan, simply because you’re stretching the payment out.
Even if you secure a personal loan with a low interest rate, the longer term means higher overall interest paid. Consider a loan of $10,000 with a 3-year term and a 15% APR. Total interest costs would be $2,480. Now take those same loan terms but stretch the payment out to 10 years and you get total interest of $9,360. One way to help reduce costs is to make sure you get a personal loan with no prepayment penalties so you pay it off more quickly, when your budget permits.
Total interest paid
Total amount paid
Long-term personal loans for bad credit
The better your credit rating is, the better the terms you can secure for a long-term personal loan. While every shopper looking for a personal loan should compare lender rates and terms, those with bad credit may need to be even more careful since they’re not likely to qualify for low-interest, long-term personal loan offers. In addition, because many lenders have strict credit score requirements, borrowers with bad credit may also find it difficult to find a lender who will approve them.
Going through the pre-approval process can help you determine who will lend to you and the cost, without it impacting your credit score negatively.
Long-term personal loan alternatives
Rather than immediately getting a personal loan when you have a financial crisis, you might want to think about trying one of these alternatives:
- Balance transfer credit cards: These cards often offer an introductory rate of 0% on transfers, which will save you interest during that time. But if you want to stretch repayment out past the point the introductory rate ends, make sure you do the math on the post-introductory rate and compare it to long-term personal loan rates you could get.
- Home equity loans: If you have equity in your home, you may be able to borrow some of it with a fixed-rate home equity loan. However, borrowing against your equity means putting your home on the line if in the future you can’t make payments.
- Home equity line of credit (HELOC): A HELOC gives you up to 10 years open credit on equity to pull from. Rates are usually variable, however, which makes it hard to predict what rate you’ll be paying once payments are due.
- Borrowing from friends or family: If you’re unable to get approved for loans or balance transfer credit cards, or the rates you’re getting make the loan unaffordable, you could consider asking friends and family to loan you money at a low rate for a long term. This is a move that can be very stressful, however, and can put a strain on a relationship even if you’re paying back the loan according to the terms agreed upon.
Consider your financial situation and your needs before applying for credit. A long-term personal loan may be an affordable option when you need a loan, but a lengthy term could mean you’ll be in debt for a long time, and certainly pay more in interest overall. The alternatives above, meanwhile, have their own requirements, benefits and drawbacks to consider, so weigh your options carefully before making a decision.