A long-term personal loan is a common solution for those willing to finance big projects. Here belong home renovations, major purchases, cover unforeseen medical expenses, or refinance debts.
The peculiarity of such is the increased amount and a long period to pay off your loan, which usually ranges from 5 to 7 years but, in some cases, can reach 12 years.
Along with long-term personal loan, there are short-term loans with comparatively low APRs and higher monthly payments. Loans with longer tenures include home and car buying and payday loans with longer repayment terms.
The loans can also be used for small businesses and pursuing higher education. For instance, a home equity loan can last nearly 25 years. Let’s discover more about this category.
Best Long-Term Personal Loans
What Is a Long-term Personal Loan?
A long-term personal loan is a type of credit in a substantial amount, taken out for various purposes and repaid over an extended period. However, this time is not limited to 7 or 10 years: for some borrowers, it’s convenient to repay in capped tenures such as 3 years, whereas others choose to prolong it even more, with the longest term up to 30 years.
It is typical to take out long-term loans if borrowers have goals to achieve specific financial milestones in their lives. For example, personal loans can be used for purchasing property, financing higher education, buying vehicles, etc. Such loan offers are widely available all over the US and normally require collateral.
How Do Long-term Personal Loans Work?
The spheres of applying for long-term loans are numerous. First of all, this is handling personal needs like weddings and making purchases for the future, like a house or flat.
At the same time, people running businesses can benefit from this financial assistance. This includes situations if they aim to buy equipment and property, meet certain requirements of the start-up phase, develop teams, and organize larger production. For the latter cases, personal loans are often provided by specific financial institutions that offer long-term personal loans. E.g., National Funding, TD Bank, Lendio, QuickBridge.
If you consider a long-term personal loan a suitable way out, it is a must to know how they work. Loan conditions and terms differ a lot based on the reason for applying, the user’s credit history and credit score, and whether they have a steady income.
Like any other loan, this one consists of the principal and interest. Longer loan terms most often mean higher interest rates for anyone opting for such. To pay back, borrowers make monthly installment payments.
A long-term personal loan also implies that one has to submit collateral. This possession works as a guarantee for the bank that, if the borrower fails to repay the amount taken, the institution doesn’t go broke. That’s why the loan is classified as a secured loan.
How to Get a Long-term Personal Loan
Obtaining a long-term personal loan is possible in a number of ways. Turning to banks, credit unions and online lenders is widespread in the US, depending on user relationships with the institutions.
Each lender poses their own requirements to borrowers, known as eligibility criteria, as well as maximum and minimum loan amounts. It is vital to note that the decision should not be made in a hurry. Take time to research all user conditions and demands and compare lenders in your state to have the best options in sight. Check out how competitive their APR is, and think about how long you will need this loan.
Sometimes you would rather want to pay bigger regular installments than get stuck in repaying for over 10 years. Besides, financial situations can change and you might no longer like the prospects of repaying the same debt 7 years from now.
Here is how to receive a long term personal loan:
- Know how much to borrow.
It’s easier to search if you know what amounts you’re targeting. See if a sum up to $50,000 would be enough or if you’d like larger loan amounts, and don’t take more than you’re sure will be spent.
After conducting detailed research for lenders relevant to your part of the States and choosing a worthy company, now is the time to check if the odds are high that you will be given a loan. An online lender would let you pre-qualify by filling out a form. No worries, usually this procedure doesn’t impact credit score.
- Look through the offers personal loan provider has.
One and the same company may offer personal loans with terms for hardships (longer term, up to 12 years) and a regular repayment term. The interest rate on a long-term credit tends to be on the higher side.
The choice will also depend on the key goal you need a personal loan for. For example, with some types, users can claim tax benefits. This refers to home loans and significant property renovation projects.
- Apply for a loan.
Having received all the data and details on conditions, send an online application. Most long-term personal loan lenders fund users in 24 hours to a few business days if they are found eligible.
Can I get a long-term loan with bad credit?
In general, it’s not a breeze to obtain this kind of loan with bad credit. However, with various providers who offer personal loans for every user and situation, it becomes possible.
Still, it depends on your score points if you will be able to take out the lump amount necessary for the project. The interest could also be higher, and there would be limited offer loan types.
Where to get a long-term personal loan
Here are the sources where extended loans typically are taken out (as well as shorter-term loan amounts):
- Credit unions.
These financial institutions are known to be more loyal when it comes to interest rates, periods to pay back the loan, and flexibility in repaying. One needs to be a member of a credit union before requesting a loan. What is most attractive in credit unions is accepting borrowers with low and fair credit scores.
Conventional banks allow people to get long term personal loans with repayment periods of up to 7 years. Other factors like bonuses, moderate interest rates, and similar incentives are often influencing the decision to have personal loans from banks, especially if you’re already familiar with the bank and its offers.
- Online companies.
This method doesn’t need introduction since the web is filled with lenders with loans available for online application and instant approval. Yet, seeking such loans can also be a challenge: most online companies restrict user profiles only to good and excellent credit scorers, granting them a lower interest rate and loans with terms convenient enough to repay.
Pros of Long-term Personal Loans
- Increased loan amounts.
For needs that expect large financial assistance, such as renovating an apartment, purchasing cars, and paying for medical operations, this type of loan may be a good solution. It’s hard to think of another similar opportunity somewhere else in the loan market.
- Reasonable monthly payments.
In contrast to short-term loans, these allow users to bring less monthly dues. They can pick a regular payment in the size that won’t stress their budget out.
- Helpful for building good credit history.
If you’re looking to make a strong credit history to get better treatment from the side of creditors in the future, this may serve as a great chance to improve your credit rating.
- It’s easy to provide collateral.
For home renovations, the house itself can be used in the role of collateral. Unlike unsecured loans, it also makes secured long-term loans easier to take out.
- A higher interest rate.
The joy of having access to bucks in the right amount and repaying with no hurry is balanced, though with high rates on long-term loans. This is just the nature of the loan type, – a personal loan with a longer pay-off period is deemed high risk.
- Interest accumulation.
Due to huge repayment periods, the total cost of the loan might appear a lot higher than the cost of the equal loan taken for a shorter time.
- Not all are eligible.
Let’s face the truth: either users with crystal-clean histories or great scores have good chances to be approved.
Who should (and shouldn’t) consider a long-term personal loan
Life can throw us different circumstances and we never have to consider a single loan type as a universal solution. When we look at all the details of long term loans, it is clear that one needs to harp on their pluses and minuses in a specific case. Considering loan purpose, the term for a personal loan to be completely paid off and looking into the future is important.
When to consider a long-term personal loan:
Loans like a long-term loan are, first of all, created to help people improve certain areas of their lives. In emergency cases like medical bills, repairing a house, or making a large purchase, it goes without saying that a long term loan would be suitable. To add, if you find yourself on this list, this type of loan might be good for you as well.
- Those seeking to make smaller monthly payments.
- People who need to obtain a more-than-average loan amount to get a specific personal or household need covered.
- Those who are likely to make on-time payments and are sure this won’t change their monthly expenses much or plans for other future purchases.
- Users looking for personal loan funds to invest with. Such loans can be used as investments too.
As you can see, one must have a clear reason to get a long term loan and the assurance of their ability to repay consistently.
When a long-term personal loan is a bad idea:
Apart from great benefits like taking control over the debt with moderate sums, choosing a personal loan may cause huge inconveniences and become a burden on one’s shoulders.
So, who shouldn’t consider a long-term personal loan and try to avoid a long-term personal loan?
- Anyone having other loans or debts.
These loans are often more expensive and daunting in the sense that they actually extend the time to repay the loan to decades.
- Users seeking to improve their credit score at all costs.
A prolonged repayment term length isn’t a cure-all for borrowers who want to recover credit scores. If you’re not sure you can handle this debt well, opt for a good credit card or loans for bad credit that help rebuild credit score instead.
- Anyone who doesn’t want to risk collateral.
Again, if being steady and faithful to paying off the loan isn’t about you, it’s better not to give the lender a reason to seize your property.
How a long-term loan could affect your finances
With a close look at how a loan with a longer term may function, now we are able to summarize the impact loans with longer terms can make.
So, one of the most underrated effects is that long-term personal loans typically infer penalties on early repayment.
It might sound like a good idea to pay the loan off early. But, in reality, prepayment of a long-term personal loan may cause a penalty fee. Though, on the one hand, you might be saving on the interest for all the coming months and years, this fee can possibly exceed the interest rate on the loan.
How is the fee calculated? Now, it gets interesting. As we mentioned, it can equal the sum of money the bank could lose if you repay the loan before it is due. As an alternative, it can be the specific percent of the loan balance.
Prepayment penalties are highlighted in loan agreements, and that is another reason to discover personal loan fees through reading it carefully before signing. If you think you need a long-term loan, get a long-term loan with no early payment fee, e.g. LendingClub.
Personal long term loan repayment terms
Now, the classification of loans is somehow vague in terms of repayment periods. It also differs from country to country. For instance, in the UK, experts claim that all loans with more than a year’s term belong to long-term.
As for the United States, if loans are available for repayment in 2 years and more, they can belong here. The longer your loan term is the smaller amount you will have to pay each month over the course of the loan. Still, you will find yourself paying more interest rate on a long-term personal loan with time. This is one of the biggest cons of long-term loans
All in all, for both personal loans for bad credit and good to excellent credit, it is typical to last from 60 to 90 months, depending on the type.
describe on a list of personal long term loan repayment terms – 250 words approx.
Long-Term Personal Loan Rates
When considering long term personal loans as the most suitable way to refinance major purchases by spreading payments evenly over the years, the key factor here is loan rates. To know what to expect from lenders, have a look at the common interest rates of US companies (a wide range, to be honest):
- Lending Point: 7.99% to 35.99%.
- Upgrade: 8.49% to 35.97%.
- SoFi: 8.99% to 23.43%.
The rate is defined based on your income and employment status, credit score, overall loan size, and credit history, especially recent records.
Long terms cost more than short terms in the long run
It is true that one of the cons of long-term personal loans is that borrowers pay more general interest during the life of the loan and this makes the overall cost of the loan larger. Those with shorter terms have lower loan costs because they are divided into larger monthly payments for a shorter time.
Anyway, in many cases, long term loans can be a great option. They don’t make repayment stressful or urged, on condition that the loan duration is chosen wisely.
Tips to Compare Long-term Personal Loans
Keep in mind to take it seriously. Comparing loans is something your financial future depends on.
To compare long-term personal loans, we recommend you receive quotes from several lenders. Pick those avoiding hard credit inquiries, compare only the same things in them (i.e. fixed rates to fixed), and watch out for reviews in the press to see their real reputation.
Check your credit score before you apply
At the start of shopping for a long-term loan, revisit your credit score. This information will be crucial in applying and seeing if you qualify for a desired loan. Plus, if there are any mistakes, request to correct them immediately: creditors give the best rates exclusively to users with excellent scores.
Evaluate how much you need to borrow
Look at your real needs, – not too modest or too luxurious. Seek advice from family members and, if needed, additionally financial advisors to determine the sum corresponding to your current need.
Compare available loan terms
See what repayment terms will work best for your nearest plans and lifestyle. It’s easy to find 60-90 month terms, however, long-term loans can also reach a decade, such as those for large purchases.
Choose a lender with competitive interest rates
Being granted a rate low enough to afford this interest means using a personal loan on your own terms. That’s where your credit score and history weigh a lot. Compare also early charges, origination fees, late fees, and others to check the total costs.
Determine how quickly you need the loan proceeds
Loans with extended loan terms won’t be funded instantly. But it makes sense to check how fast you can expect the money in your account. Many of them would transfer it after weeks.
During the review and assessment of different loans to take for a long term in the U.S., we were especially focused on several key details. They include:
- The accessibility (ease of obtaining)
- Loan overall cost
- The nature of interest rate (fixed or floating)
- Fees (origination fee, late payment fee, APR)
- Loan amounts
- Loan terms
- Add-on features like rate discounts, zero or reduced APR for new users, etc.
We also considered the time of funding the loan and ways to track the loan progression, like mobile apps or other banking tools. Eligibility in a range of cases was also within the scope of research, including the allowance of a joint application, co-signers, minimum credit score requirements, as well as states where loans function.