Advantages and disadvantages of long term personal loans

A slow and steady strategy can help you win the race to pay down debt. (iStock)

The difference between a standard Personal loan – like the kind you see in online advertisements and in your mailbox – and a long-term personal loan is subtle. Still, it’s important to know the differences between the two, as these simple changes can have a huge impact on your bottom line.

What is a long term personal loan?

A long-term staff to lend is incredibly similar to a personal loan: it is a large lump sum paid to the borrower and repaid with a fixed monthly payment over a fixed term. The biggest difference is that the time you have to pay off a long-term personal loan is usually over five years. Having a few extra years to pay off debt can make a big difference when it comes to financing big purchases like medical bills and home repairs.


Due to the longer repayment period and higher interest rates, this type of financing is best used when borrowing large sums of money like between $10,000 and $50,000.

How long does it take to repay a long-term personal loan?

As always, loan terms vary by lender, but most long-term personal loans offer a repayment period of up to seven years.

Finding this type of loan can be a little trickier; long-term personal loans can be harder to find (and even harder to get) due to tighter credit requirements. In the eyes of the bank, the longer you have to repay a loan (especially an unsecured loan where no collateral is required), the longer you have to default on the loan. Thus, they view these loans as riskier than their shorter-term counterparts.


Of the lenders listed below, the minimum credit score required to qualify is between 600 and 680, which means long-term personal loans may be out of reach for those with poor credit.

Current online lenders offering long-term personal loans include:

  • Marcus of Goldman Sachs
  • light stream
  • SoFi
  • Discover personal loans

When considering a long-term personal loan, it may also be worth going the “old school” route and going to the local branch of your bank or credit union. If you already have an existing relationship, these financial institutions may offer better interest rates or more favorable repayment terms than online lenders can offer.

Long-term personal loan: the pros and cons

The biggest advantage of a long-term personal loan is having more time to repay the money. A longer term also means your monthly payment will be significantly lower than a more traditional “short term” personal loan.

The biggest downside to the long-term personal loan is the amount you will pay in interest. (Not to mention that it will take you longer to get out of debt.)

  • For example, let’s say you have to to borrow $25,000 to make several expensive repairs to the house. At an annual percentage rate of 17% on a 36 month personal loan, you will pay $7,087 in interest.
  • By increasing the repayment term to seven years, you will reduce the monthly payment by more than $300, but you will pay $17,914.78 in interest, a difference of more than $10,000.

In addition, because long-term loans are considered “riskier” in the eyes of the bank, many long-term loans APR at the same interest rate as many credit card companies, with some APRs going even higher.

For those who have access to other financing options, such as balance transfer offers or low APR personal loans, these may be the best, cheapest option. However, if you’re currently at peak debt or living paycheck to paycheck, finding a nice, low monthly payment can be a great way to manage your debt without having to worry about debt. another high minimum monthly payment.

Aurora J. William