What are long-term personal loans?
Long-term personal loans are loans that let you pay back the amount you owe over a longer period of time. While most unsecured personal loans have terms between one and five years, long-term personal loans are seven years or longer. Depending on the amount borrowed and the purpose of the loan, some lenders may even extend repayment terms up to 15 or 20 years. This is especially common with large home improvement loans.
It’s usually best to choose the shortest repayment term that still has monthly payments you can afford since this saves money on interest.
Pros and cons of long-term personal loans
Pros of long-term loans
You’ll have smaller monthly payments: Because you have a longer period of time to repay the loan, you don’t have to pay as much each month, which keeps the monthly payments affordable.
You can cover larger expenses: Long-term loans come with amounts up to $50,000 — in some cases, as high as $100,000 — which can help you cover a particularly large expense you wouldn’t be able to afford otherwise.
Cons of long-term loans
You’ll have a long financial commitment: Your financial picture will likely change over seven years or more. Carrying a long-term debt means you might have to make trade-offs with future financial decisions, like building up your emergency fund or saving for a down payment.
You’ll pay more interest: Loans with longer terms typically charge more interest, since they represent greater risk for the lender. Paying more interest means your loan costs more compared to a shorter-term loan.
For example, if you take out a $15,000 loan with a 14% APR, here’s how the monthly payment and interest vary, based on two different loan terms:
| Three-year loan | Seven-year loan |
|---|
Monthly payment: | $513. | $281. |
Interest paid: | $3,456. | $8,612. |
Total loan cost: | $18,456. | $23,612. |
When to consider a long-term personal loan
A long-term loan is ideal if you need to keep monthly payments low, and you’re confident you can make the loan payments for the full term. It can also be helpful if you’re borrowing a large sum of money and need more time to pay it back — for example, if you need to borrow $50,000 for a kitchen remodel or another major home improvement project.
You may also consider a long-term loan for debt consolidation. A debt consolidation loan works best if you get a lower interest rate on the loan than the average interest rate on your existing debts, or if the loan helps you to get rid of debt faster.
For example, if it will take 10 years to pay off your credit cards, a seven-year consolidation loan may be a better option.
How to get a long-term cash loan
1. Determine your borrowing amount and ideal monthly payment
If you’re planning on taking out a long-term loan, it’s important to know exactly how much cash you need to borrow. Some lenders only extend their longest terms for loan amounts of $25,000 or more.
You’ll also want to know the amount you can afford to pay each month. NerdWallet’s personal loan calculator lets you plug in different loan amounts, terms and interest rates, so you can get an idea of what type of loan best fits your budget. 2. Research lenders that offer longer terms
Not all lenders offer long-term loans. The list above is a good summary, but you can also check what terms are offered at your local credit union. Credit unions tend to be more flexible, even when borrowers have fair or bad credit (any score between 300 to low 600s). You’ll need to become a member before you apply, but membership is quick and affordable at most credit unions.
Pay attention to any requirements for long-term loans, which vary by lender. In addition to larger loan amounts, some lenders require a specific loan purpose, like home improvement, to extend a longer term.
3. Pre-qualify and apply
Before applying for a long-term loan, pre-qualify with a few lenders to preview the loan offers you might receive. This helps you compare rates without hurting your credit score, so you can choose the most affordable option.
Once you’ve settled on a lender, it’s time to apply. You’ll be asked to provide personal and contact information, like proof of identification, Social Security number, address and phone number. You may also need to provide proof of employment and income.
The lender will then conduct a hard credit pull and make an approval decision. While some decisions are instantaneous, other lenders may take a few days to get back to you.
4. Get funded and prepare to make your first payment
Funding time varies by lender, but most lenders fund loans within one week, and some can even fund your loan the same day you’re approved.
Once you receive the money in your account, add the monthly payment amount to your budget and get ready for your first payment (due in about 30 days). Missing even one payment over the length of the term can hurt your credit score and result in late fees.
It’s a good idea to repay the loan early if you’re able to, since you’ll save money on interest. Almost no lenders charge prepayment fees, so there’s no penalty for repaying early.
