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Personal loans have a wide range of repayment periods — some with short two-year terms, and others with long terms stretching out to five years or more. But if you’re in need of a more accommodating timeline for your long-term personal loan, there are lenders offering as many as 12 years for repayment.
Before you take out long-term personal loans, however, there are a few things you should consider:
Long-term personal loans: The basics
A personal loan term is the length of time the borrower has to pay back their lender. Personal loans — typically unsecured loans offered by banks, credit unions and online lenders — generally have short-term repayment limits of five years or less.
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 five years (60 months) or more.
For example, to see the difference this can make in repayments, consider a $10,000 loan that has to be repaid over three years and has a 15% APR rate. That would require a monthly payment of about $347. If that same loan could be paid back over 7 years, the monthly payments would be only $193.
There are a variety of popular lenders with loan terms of five 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:
Pros and cons of long-term personal loans
Every financial decision has positive and negative points. Let’s recap both pros and cons of getting a long-term personal loan:
- 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, especially if you don’t have good or excellent credit
When it makes 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 — these can include 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 — not repaying loans can result in a lower credit score, collections and even garnished wages.
How to find long-term personal loans
If you think a personal loan for 10 years (or more) is right for your budget, explore lenders such as LightStream which offers loan terms up to 12 years (144 months) or Navy Federal Credit Union where you can take out a 15-year personal loan for home improvement projects.
But while a 10-,15- or 20-year personal loan 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, though, 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 three-year term and a 15% APR. Total interest costs would be $2,480.
Now take that same amount but stretch it into a 10-year personal loan 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 preapproval process can help you determine who will lend to you and the cost, without it impacting your credit score negatively.
Alternatives to long-term personal loans
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, generally for 12 to 18 months, which will save you from interest during that time. (Still, note that balance transfer cards can charge a fee — typically between 3% and 5% — to make that transfer.) 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 will generally give 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. As with a HEL, failure to repay can result in you potentially losing your home.
- Borrowing from friends or family: If you’re unable to get approved for loans or balance transfer credit cards, or if 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 might end up becoming very stressful, however, and in some cases could put a strain on a relationship even if you’re paying back the loan according to the terms agreed upon.
Next steps to consider
Evaluate your financial situation, budget your money and your financial 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 interest overall.
Alternatives to long-term personal loans, meanwhile, have their own requirements, benefits and drawbacks to consider, so weigh your options carefully before making a decision.