What is a long-term personal loan?
Technically, a long-term personal loan is any loan with a repayment term of 24 to 144 months — that is, 2 to 12 years. Typically, the longest terms are only available on the highest loan amounts. For example, you may have to borrow $50,000 to $100,000 to get a 10- or 12-year term.
When choosing a personal loan term length, always opt for the shortest term possible with monthly payments you can afford. The shorter the term, the less interest you’ll pay in the long run. You’ll also likely get a better rate with a shorter term loan.
Where to get a long-term personal loan
Many types of lenders offer long-term personal loans, including banks, credit unions and online lenders.
- Banks: Banks like Discover, Wells Fargo and U.S. Bank offer personal loans with terms of up to seven years. All offer online applications, and some have branches you can visit.
- Credit unions: Credit unions like PenFed and Navy Federal offer personal loans with terms of up to seven years.
- Online lenders: Digital lenders like LightStream, SoFi and Upgrade offer loan terms of up to seven or even 12 years, depending on the loan amount. Online lenders may offer more competitive rates than banks or credit unions, with quick one- to three-day turnaround.
If you don’t have a lot of time to search, you can compare offers from multiple lenders at the same time by using a connection service like Monevo or LendingTree.
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When to get a long-term personal loan
With lower rates than a credit card, a long-term personal loan can be a great tool for consolidating debt or covering a large, one-time expense. Ideally, a long-term personal loan should help you save money compared — at least compared to the alternative. Here are some common ways to use a long-term personal loan:
- Debt consolidation. Pay down your credit cards using a personal loan with lower rates to save on interest and simplify your payments by moving it all to one account.
- Small home improvements. While a home equity loan or HELOC may be a better option for big improvements, thanks to the lower rates, a personal loan can be a quick way to get funds for small projects like redoing your bathroom. Ideally, this should add to the value of your home.
- Time-sensitive expense. Say you’re the main player in a destination wedding, and you need to cover the cost of a flight, hotel, dress and gift, which you can’t foot upfront. Using a long-term loan is cheaper than a credit card, plus the fixed monthly payments help you avoid unmanageable credit card debt.
If you have a credit score above 670 — what lenders consider good credit — you could have an easier time qualifying for low enough rates and loan amounts to make a long-term personal loan worth it.
Long-term personal loan rates
Long-term personal loan rates can range from 6% to 36% APR. The average interest rate on a 2-year personal loan was 11.21%, according to the Federal Reserve, though rates are likely higher on longer terms. In addition, some lenders charge origination fees of 1% to 10% on their long-term loans – but not all do, especially if it’s a lender that caters to good to excellent credit.
By comparison, payday lenders and installment loan providers — also known as short-term lenders — charge APRs that can exceed 600% and don’t offer terms longer than a few months or a year.
Long terms cost more than short terms in the long run
Lengthening your term can lower your monthly payment. But the longer your loan term, the low the more you’ll pay in interest. This is partly because a long loan term allows more time for interest to add up.
On top of that, lenders also tend to charge higher rates for longer terms — meaning those monthly savings just might not be worth it. These examples show how the monthly and total interest cost of a $10,000 loan varies depending on the term.
| Loan amount | Term | APR | Monthly payment | Total interest paid |
|---|---|---|---|---|
| $10,000 | 24 months | 6.0% | $443.21 | $636.95 |
| $10,000 | 36 months | 8.5% | $315.68 | $1,364.31 |
| $10,000 | 48 months | 9.0% | $248.85 | $1,944.82 |
| $10,000 | 60 months | 9.5% | $210.02 | $2,601.12 |
| $10,000 | 72 months | 10.0% | $185.26 | $3,338.60 |
| $10,000 | 84 months | 10.5% | $168.61 | $4,162.97 |
While extending your loan term from 24 months to 84 months may more than cut your monthly payment in half, you’ll pay over six times more in interest over the life of the loan.
Calculate the cost of a long-term loan
The cost of a long-term loan varies depending on the loan amount, rates and terms you apply for. Use our calculator to see how changing the term affects the monthly and total amount you pay in interest over the life of the loan.
Personal loan calculator
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Pros and cons of long-term personal loans
Weigh the main benefits and drawbacks of this type of financing before you apply.
Pros
- Lower monthly payments. The main benefit of a long-term personal loan is that it can lower the monthly payments, giving you more flexibility with your finances during the life of the loan.
- Large expenses are more affordable. Long-term personal loans allow you to finance more expensive purchases, such as cars or boats as well as big events, like a wedding or medical procedures.
- Pay off the loan as your budget allows. If your lender doesn’t charge prepayment penalties, you can still save on interest by making extra repayments with windfalls like a raise or annual bonus without straining your budget each month.
Cons
- Higher rates. The longer the loan term, the more most lenders will charge in interest — even if you have perfect credit. Some might also charge higher origination fees.
- Higher total cost. High interest rates combined with a longer period for interest to add up can mean you’ll pay several times more than you would have with a shorter term.
- In debt for a longer time. A long-term loan can make it harder to qualify for other credit until you pay it off. It can also lower your credit score, which can make it more difficult to rent or buy a house or apartment.
Is a short loan term better than a long term?
While you’ll pay less interest with a short term personal loan, it really depends on your needs. If you need to borrow less than $10,000 and can pay it back in two or three years – a shorter term loan could work well for you.
On the other hand, if you need to borrow more than $10,000 and want smaller monthly repayments, a longer term loan may work better for your monthly budget – even though you’ll pay more interest over the long run. Longer loan terms give you more flexibility with monthly payments, especially if a lender doesn’t charge a prepayment penalty.
How to qualify for a long-term loan
Requirements vary from lender to lender, but generally, you must meet the following criteria to get a long-term loan.
- Personal credit score of 670 or higher
- Annual income over $24,000
- Debt-to-income ratio below 43%
- Over 18 years old
- US citizen or permanent resident
Your credit score and income can also affect your term. You’ll have the most options with a good credit score. The lower your credit score, the higher your interest rate, which can make the monthly repayments on a long-term loan unaffordable.
How to compare long-term personal loans
Ask yourself these questions when comparing lenders.
- What is the APR of the loan? The APR largely defines what your payments will be throughout the loan, with any fees included. This helps you compare apples to apples when choosing a loan.
- Is the loan secured or unsecured? Secured loans require collateral and typically have lower interest rates than unsecured loans, which don’t require collateral.
- How much can I borrow? The amount you can borrow depends on factors like your credit score, what you need the funds for, your ability to provide suitable collateral, your annual earnings and your monthly expenses.
- Can you repay the loan early? Repayment flexibility may be important to you even if you want a long-term loan. You may come into some cash and want to make extra payments or decide to pay your loan off altogether before the original payoff date. Find out if you can do so without penalty.
- What are the other fees and charges on the loan? Check your loan contract for a full list of fees and charges you may have to pay. Some loans with longer terms have an origination fee, maintenance fees and other small charges that can quickly stack up to make your loan much more expensive.
Can I get a long-term loan with bad credit?
It’s possible to get a long-term loan when you have bad credit. Some lenders – like Avant, Upgrade, Upstart, OneMain Financial and Oportun – cater to fair and bad credit borrowers. But how much you can borrow and for how long depends on your current earnings, employment history and how much debt you have.
But the lower your credit score, the higher interest you’ll be charged, plus origination fees, which can reach up to 10%. If your score is below 620 and you can’t secure a fair rate, it may not be worth it. Here are some alternatives to personal loans that may be cheaper.
How to get a long-term personal loan
Get a long-term personal loan by following these steps:
- Set a monthly budget. Know how much you can afford to pay each month to help you choose a term you can comfortably afford and pick a lender that fits the bill.
- Compare lenders. Cast a wide net by looking at personal loans from banks, credit unions and online lenders with minimum requirements that you meet. Compare factors like terms, interest rates, fees — including whether it has an origination fee — and loan amounts.
- Prequalify. Get an estimate of the rates, terms and loan amount you might qualify for with a few providers you narrow your list down to. You can usually do this by filling out a short online form or calling the lender.
- Complete the application. After you select a lender, follow the directions to provide more information and submit documents like recent pay stubs and bank statements.
- Sign the documents. Review your rate, terms and due date before signing and submitting your contract.
If you apply with an online lender, bank or credit union that you have an account with, you can receive your funds as soon as the next business day. Otherwise, it could take a few business days or even a few weeks.
Bottom line
Long terms may be a good choice for larger loan amounts – but you could save hundreds or thousands in interest if you choose a shorter term. For example, if you choose a $50,000 personal loan at 11.08% with a 5-year repayment term over a 10-year repayment term, you’d save a whopping $17,575 in interest.
That’s money in your pocket that could go towards a number of things, including a down payment on a home, your education or a once-in-a-lifetime vacation. Compare personal loans to find the right fit for your lifestyle and budget.
