What Are Long-Term Personal Loans?

Q: What are the benefits of a long-term personal loan?

Long-term personal loans provide lower monthly payments, making them more manageable for borrowers with tight budgets. They also allow for larger loan amounts, which can be useful for significant expenses such as home improvements or debt consolidation. However, you may end up paying more in interest over the life of the loan, due to the interest rate and length of the loan.

Q: Who qualifies for a long-term personal loan?

Eligibility for a long-term personal loan depends on factors such as credit score, income, and debt-to-income ratio. Borrowers with good to excellent credit and stable income are more likely to qualify for favorable terms, while those with lower credit scores may face higher interest rates or require a cosigner.

Q: Are there any downsides to taking out a long-term personal loan?

Yes, the main drawback is the higher overall interest cost due to the extended repayment period. Additionally, committing to long-term payments can be risky if financial circumstances change. Some lenders may also charge prepayment penalties if you decide to pay off the loan early.

Jamie CattanachUpdated March 28, 2025

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

Most personal loans are repaid over a term of one to five years, but for those who need more time to pay back what they owe, long-term personal loans are available. However, these loans with longer terms may come with their own drawbacks and benefits.A long-term personal loan might keep your monthly payment low, but you’re likely to pay more in interest over the lifetime of the loan — especially since long-term personal loans tend to have higher interest rates than their shorter-term counterparts.Still, a long-term personal loan might be the right option for your circumstances and needs. Below we highlight the pros and cons of long-term personal loans.

What Is Considered a Long-Term Personal Loan?

Any personal loan with a term of more than five years is considered a long-term personal loan, and their terms can sometimes stretch as long as 10 years.Just like how a personal loan works usually, long-term personal loans allow you to borrow a set amount of money that you then repay in regular monthly installments that include both the principal and interest. A long-term personal loan may allow you to borrow a higher amount at lower monthly installments. However, you’ll almost certainly pay more in interest over the lifetime of the loan.Additionally, being in debt for such a long period of time can make it difficult to achieve other financial goals.Recommended: What Is a Personal Loan?

Pros and Cons of Long-Term Personal Loans

While there are some benefits to long-term personal loans, they have important drawbacks to be aware of, as well:

Pros of Long-Term Personal Loans	Cons of Long-Term Personal Loans
Lower monthly payments	Tend to have higher interest rates
Larger loan amounts	Borrowers may pay more interest over the lifetime of the loan
Can be used for various financial needs	Potential prepayment penalties

Pros of Long-Term Personal Loans

Long-term personal loans can be a great financing option for borrowers who need larger loan amounts with lower monthly payments. One major advantage is the extended repayment period, which makes it easier to manage monthly expenses. Keep in mind, though, that you’ll pay more interest over the life of the loan with a longer repayment period.Another pro is that borrowers can use long-term loans for various purposes, such as debt consolidation, home improvements, or major life expenses. They also may be easier to qualify for than short-term loans, especially for individuals with a strong credit history.

Cons of Long-Term Personal Loans

The biggest downside to long-term personal loans is that borrowers may pay more in interest over the life of the loan. This is because of the extended repayment period. Even if you qualify for a competitive rate, the interest is compounded over a longer period of time than it would be on a short-term personal loan.Other cons include higher interest rates for those with lower credit scores, potential prepayment penalties for those who wish to pay off their loan early, and an increased debt-to-income ratio, which could affect future borrowing opportunities. Recommended: Personal Loans: The Pros and Cons Explained

Long-Term Personal Loan Uses

Long-term personal loans can be used for a variety of purposes, making them a flexible borrowing option.They can be used to consolidate existing debt — specifically, debt that may have a high interest rate, like credit card debt. When you consolidate debt, you’re taking out a new loan (ideally at a lower rate) and paying off your old debts. Rather than having multiple payments each month, you now just pay the new debt consolidation loan.You could also use a personal loan as a home improvement loan that could increase the value of your home and add to your wealth in the form of equity. In general, a personal loan of any term length may be a good idea when the loan stands to pay for itself over time, whether in the form of money saved or earned.And finally, borrowers often use these loans for medical expenses, particularly when faced with unexpected procedures or ongoing treatment that insurance may not fully cover.

How to Qualify for a Long-Term Personal Loan

Qualifying for a long-term personal loan requires meeting specific lender requirements, which typically focus on creditworthiness, income stability, and debt-to-income ratio. Lenders generally prefer applicants with a credit score of 670 or higher, though some may approve borrowers with lower scores at higher interest rates. A strong credit history with consistent on-time payments and a low credit utilization ratio can also increase your chances of approval. Additionally, lenders assess your income and employment status to ensure you have a steady source of income that can support long-term repayment. They’ll also look at your debt-to-income (DTI) ratio, which measures how much of your income goes toward existing debts.If you’re struggling to qualify on your own, you could consider getting a personal loan with a cosigner or putting up collateral to secure the loan.

Long-Term Personal Loan Application Process

Long-term personal loan applications are mostly done online, but you can of course go into a bank or credit union if you need additional assistance. You’ll be asked to supply basic demographic and financial information, such as:

Your name
Birth date
Social Security number
Your annual income
Current employment status
Employment history

When applying for a loan, lenders are assessing how much of a risk they think they’re taking by extending the money to a borrower, which is why the application process is so thorough. The lender will take into account your credit history and existing debt, which will then be used to determine your interest rate if you qualify.Once you’re approved, the lender will disburse the money to you, which you can use toward your expenses. You’ll then begin making monthly payments in order to repay the loan, plus whatever interest is charged.Recommended: How to Avoid Personal Loan Scams

Alternatives to Long-Term Personal Loans

A long-term personal loan might be the right tool for your financial needs, but given their cost and the length of time you might be in debt, it’s worth considering alternatives. Your other options may be to:

See if there’s a way to avoid taking on debt. If there’s a way to avoid going into debt, such as by using money in an emergency fund, that might be the least costly way to take care of your expenses. That being said, you don’t want to completely collapse your savings, even for projects like debt repayment.
Consider a credit card. Credit cards might be an alternative to long-term personal loans, but they tend to have fairly high interest rates, and it can be easy to spiral into debt. If you can qualify for a 0% APR introductory rate, that could be a way to pay for your purchase without paying interest (assuming you can pay it off before the introductory period expires).
Look into 401(k) loans, paycheck advances, or salary loans. You might also consider taking out a 401(k) loan or a salary loan. Certain employers may also offer paycheck advances, which may help cover an emergency expense without having to rely on a personal loan.

Recommended: What Is a Good Interest Rate on a Personal Loan?

The Takeaway

If you do decide a long-term personal loan is right for your financial needs, it’s worth it to shop around and find the one with the most competitive rates. Even a few percentage points of interest can add up over the course of a lengthy loan term.Lantern by SoFi makes it easy to find personal loan offers and compare interest rates. Just complete a simple form and get personalized offers in minutes.Explore your personal loan options with Lantern.

Frequently Asked Questions

What are the benefits of a long-term personal loan?

Who qualifies for a long-term personal loan?

Are there any downsides to taking out a long-term personal loan?

Photo credit: iStock/urbazon

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About the Author

Jamie Cattanach

Jamie Cattanach is a full-time freelance writer whose work has been featured at CNBC, Yahoo Finance, The Motley Fool, the Huffington Post and other outlets. At SoFi, she writes about investing, retirement, student loans and how to get your money right -- no matter what that means for you.

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