How to Decide If Long-Term Personal Loans Are Right for You

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Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

long-term personal loans

If you’re in a pinch and need cash, where do you turn? Increasingly, American consumers are turning to personal loans.

Outstanding personal loan balances have more than doubled in the past four years, reaching $112 billion in 2017, according to data from TransUnion.

long-term personal loans

Image credit: TransUnion

Long-term personal loans can help you get the money you need when you need it — along with affordable payments.

There’s no rule about which terms are considered long-term personal loans. However, in most cases, a long-term personal loan will have a loan repayment term of five years or longer. Here’s a look at how long-term personal loans can affect your finances.

4 ways long-term personal loans can help your finances

Here are some common reasons you might choose a personal loan with a term of five years or more.

1. You want low monthly payments

If keeping your monthly payments as low as possible is important to you, then long-term personal loans can help.

It all comes down to loan amortization — or the calculation lenders use to set monthly payments. Amortizing a loan means calculating a fixed monthly payment that will cover interest and repay the principal (the original amount you borrowed) over the course of your loan term.

The longer your loan term, the more monthly payments you’ll make. A three-year loan has just 36 payments, for instance, while a five-year loan has 60.

With the principal divided up over more payments, that means a lower monthly minimum. Ultimately, choosing a longer term can free up hundreds of dollars each month. Try out our personal loan calculator and see for yourself how longer terms can lower your monthly payments.

2. You need to borrow a large amount

Another reason to choose a long-term personal loan is if you have to borrow a large amount. You might need a large personal loan to cover major costs for:

  • Consolidating credit card balances and other debts
  • Financing major home repairs or improvements
  • Covering emergency costs or expenses, such as medical bills
  • Paying for major life events, such as a wedding or a divorce

Signing on for a large loan can be intimidating. But choosing a longer loan term can help keep monthly payments manageable.

These examples from SoFi show how personal loan terms can affect monthly costs (assuming a $30,000 loan):

Loan term Lowest APR Monthly payment
3 years 5.49% $906
5 years 6.95% $595
7 years 7.95% $467

Choosing a five-year loan instead of a three-year loan will lower your monthly payment by $311. And a seven-year loan will save you $439 per month compared to a three-year loan.

Paying $906 isn’t possible for many borrowers, but $595 or $467 per month might be. By choosing long-term personal loans, you can borrow a large amount and keep your monthly payments manageable.

3. You’re using a personal loan instead of credit cards

Maybe you already have significant credit card debt. Or you’re considering paying for a major expense, such a home repair, with a credit card. In these cases, long-term personal loans are often a better alternative.

Here are a few reasons why personal loans might be a smarter choice than credit cards.

Set payoff date

Your monthly payments are always the same with long-term personal loans, and you know when you’ll get out of debt.

Credit card minimum payments, on the other hand, can stretch out repayment for decades. For instance, it would take you 22 years to pay off a $4,000 credit card balance with a 13.61% APR if you were making minimum payments.

Lower interest charges

No matter what your credit is like, personal loans usually come with lower interest rates than credit cards. That means more of your payments will go toward lowering your principal and paying off your debt instead of interest.

One-time funding

Lastly, credit cards can be tricky because they are a form of revolving credit, which means you can continue borrowing and paying off your balance. Even if you pay off $500 on a credit card, it can be all too easy to turn around and rack up another $500.

A long-term personal loan, on the other hand, provides a one-time payout. By understanding how personal loans work, you can avoid the revolving debt trap of credit cards.

4. You want flexibility to pay less if needed

Of course, there’s no set-in-stone rule that says you have to pay only the monthly minimum on long-term personal loans. In fact, it would be wise to make extra payments to get ahead of interest charges and pay off the debt faster.

For instance, you might think you could manage to pay $900 on a personal loan some months — but not every month. Perhaps you feel more confident about the $600 monthly payment for a five-year term.

You could choose the five-year term and have the flexibility to pay extra when you can. But should a month come along that you need that $300 for something else, you can pay the minimum payment without getting behind on your loan or damaging your credit score.

How long-term personal loans can hurt your finances

Long-term personal loans do have some drawbacks compared to short-term personal loans, however, which loan applicants should consider before making a decision.

Here are the biggest cons of long-term personal loans.

You’ll have a higher interest rate

Lenders usually charge higher interest rates when they face a higher risk.

Long-term personal loans present a higher risk because it takes a lender longer to get its money back, which means there’s more time for something to go wrong. Remember: Higher interest rates can lead to higher costs (more on that below).

You’ll be in debt longer

While you’ll likely have lower monthly payments, you’ll face those costs for years to come. Make sure you understand the commitment you’re taking on with a long-term personal loan and feel confident you can continue to make your payments well into the future.

Your total loan costs will increase

With a long-term personal loan, smaller monthly payments mean your balance stays higher for longer. Combine that with higher interest rates, and choosing a longer term could mean paying thousands more in interest over the life of your loan.

In the above example from SoFi, the total interest on a five-year loan is $5,600 — more than double the $2,607 paid on a three-year loan.

Because long-term personal loans have some significant downsides, it’s important to shop around and find a trustworthy lender.

5 best lenders for long-term personal loans

If you’re going to repay a personal loan for the next five years or more, you want to choose the right lender. The best long-term personal loans will have low interest rates and low origination fees.

In order to find the best long-term personal loan for you, you must request and compare customized rate quotes from a variety of lenders.

To get you started on your loan search, we’ve researched personal loan providers and rounded up our top picks.

These lenders offer long-term personal loans with terms to fit a wide range of borrowers’ needs:

    • SoFi: personal loans of five, six, and seven years
    • Citizens Bank: personal loans of five, six, and seven years
    • Upstart: five-year personal loans
    • Payoff: five-year personal loans
    • Avant: five-year personal loans

Each of these lenders also offers rate quotes using soft credit checks, so you can get a customized offer without affecting your credit. You also can compare different terms and rates with our calculator to see how they could affect your monthly payment and total interest costs.

Take your time shopping, researching, and comparing, and you can find long-term personal loans that meet your needs.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal LoansFixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 5.365% APR to 13.365% APR (with AutoPay). SoFi rate ranges are current as of April 11, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.365% APR assumes current 1-month LIBOR rate of 1.88% plus 3.735% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Fixed interest rates range from 4.99% – 16.24% (4.99% – 16.24% APR) based on applicable terms. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.73% - 29.99%$1,000 - $50,000
Check rate nowon SLH's secure site
5.37% - 14.24%1$5,000 - $100,000
Check rate nowon SLH's secure site
8.00% - 25.00%$5,000 - $35,000
Check rate nowon SLH's secure site
4.99% - 16.24%2$5,000 - $50,000Visit Citizens
5.99% - 35.89%$1,000 - $40,000Visit LendingClub
5.25% - 14.24%$2,000 - $50,000Visit Earnest
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.