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What Are Long-Term Personal Loans?

What Are Long-Term Personal Loans?
Jamie Cattanach
Jamie CattanachUpdated April 19, 2023
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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 12 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.

Pros and Cons of Long-Term Personal Loans

Long-term personal loans do have some benefits, but they have important drawbacks to be aware of as well:
Pros of long-term personal loansCons of long-term personal loans
Lower monthly paymentsTend to have higher interest rates
Larger loan amountsBorrowers may pay more interest over the lifetime of the loan
Taking out any kind of debt is always a major decision. Borrowing money comes at a cost, and it’s important to think carefully before taking on that financial burden. That said, there are some circumstances where there are benefits to getting a personal loan — and a long-term personal loan, specifically.For example, if you’re a freelancer or seasonal worker whose income fluctuates, a long-term personal loan could help you take care of large expenses at a low monthly cost while allowing you to pay more toward that debt when you can afford to. Just make sure to check whether your lender imposes any early repayment penalties.If you’re an entrepreneur, you may be interested in looking into long-term business loans, which could help your business blossom, thus earning you back the interest you spend on the loan and then some. Additionally, personal loans can be used to consolidate existing debt — specifically, debt that may have an even higher interest rate, like credit card debt.You could also use a personal loan as an unsecured 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.Recommended: Guide to Daily Simple Interest Loans and How They Work

Long-Term Personal Loan Lenders

Another potential drawback with long-term personal loans is that fewer lenders offer them. In most cases, personal loan terms are capped out at five years.That said, there are some lenders out there that offer personal loans over a lengthier timeline. You just have to shop around:
LenderMaximum loan termMaximum loan amountAPR
SoFi7 years$100,0008.99% to 23.43% with autopay
LightStreamUp to 12 years, depending on loan purpose$100,0007.99% to 25.99% with autopay
Marcus6 years$40,0006.99% to 24.99%
If your credit isn’t up to snuff, it can be difficult to qualify for a long-term personal loan — or any personal loan, for that matter. Long-term personal loans may require good to excellent credit (a FICO® Score of 660 or higher) to qualify.You may be able to find lenders who will work with you if your credit history has a few dings in it, but you’ll likely face even higher interest rates.

Long-Term Personal Loan Application Process

You apply for a long-term personal loan pretty much the same way you apply for personal loan offers in general — and these days, the entire process is done mostly online. 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 qualifying 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 then 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 if you take one out, 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 at all, 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 themselves, and it can be easy to spiral into debt since you can keep using them until they’re maxed out. Personal loans, on the other hand, are for a set, specific amount, which makes them a little bit less risky on that front.
  • Look into 401(k) loans, paycheck advances, or salary loans. You might also consider taking a loan out of your retirement account, such as a 401(k) loan, if that option is available through your provider. Certain employers may also offer payday loans, but these, too, might come with fees, so make sure to read the fine print before signing any paperwork.
Recommended: Guide to 401(k) Loans vs Personal Loans

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.
Photo credit: iStock/urbazon

About the Author

Jamie Cattanach

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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