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

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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.

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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!
LenderAPR RangeLoan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal Loans: Fixed rates from 6.990% APR to 14.865% APR (with AutoPay). Variable rates from 6.255% APR to 12.555% APR (with AutoPay). SoFi rate ranges are current as of September 1, 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 6.255% APR assumes current index rate derived from the 1-month LIBOR of 2.08% plus 4.425% 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.

    To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.See Consumer Licenses.
  2. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  3. SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
  4. 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 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.

3 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through FreedomPlus.com are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 4.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 4.99% APR loan, a borrower will need excellent credit on a loan of $15,000 with a term of 24 months, and qualify for at least two of the following discounts: (1) add a co-borrower who has sufficient income; (2) use at least fifty percent of the loan proceeds to directly pay off existing debt; or (3) show proof of having at least forty-thousand dollars in retirement savings – contact FreedomPlus for further details.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), 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.

5 Important Disclosures for LendingPoint.

LendingPoint Disclosures

  • Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates (“APR”) may vary based upon LendingPoint’s proprietary scoring and underwriting system’s review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 6% may apply depending upon your state of residence. Upon LendingPoint’s final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. LendingPoint makes loan offers from $2,000 to $25,000, at rates ranging from a low of 15.49% APR to a high of 34.49% APR, with terms from 24 to 48 months. The loan offer(s) shown reflect a 28 day payment cycle which is being offered as a courtesy as many of our customers are paid on a biweekly schedule and thus this may better align the loan payment dates with your actual income receipt schedule.

6 Important Disclosures for LendingClub.

LendingClub Disclosures

All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.


7 Important Disclosures for Earnest.

Earnest Disclosures

  1. Earnest does not lend in Alabama, Delaware, Kentucky, Nevada, or Rhode Island.

8 Important Disclosures for Avant.

Avant Disclosures

* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.

** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33


* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.

** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

7.73% – 29.99%$1,000 - $50,000Visit Upstart
6.26% – 14.87%1$5,000 - $100,000Visit SoFi
6.99% – 35.97%*$1,000 - $50,000Visit Upgrade
5.99% – 24.99%2$5,000 - $35,000Visit Payoff
4.99% – 29.99%3$10,000 - $35,000Visit FreedomPlus
5.99% – 18.99%4$5,000 - $50,000Visit Citizens
15.49% – 34.49%5$2,000 - $25,000Visit LendingPoint
6.16% – 35.89%6$1,000 - $40,000Visit LendingClub
6.99% – 18.24%7$5,000 - $75,000Visit Earnest
9.95% – 35.99%8$2,000 - $35,000Visit Avant
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.

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