Personal Loans

When Is a Long-Term Personal Loan the Right Choice?

Whether an unexpected medical expense has left you strapped for cash or you’re just looking to streamline your financial life and consolidate debt, taking out a long-term personal loan might seem like an easy way out of a money mess. But while a long-term personal loan could mean low monthly payments, a long repayment term could mean you’ll pay a lot more in interest compared with a loan with a shorter term.

Here’s what to consider when you’re looking at long-term personal loans.

What is a long-term personal loan?

A long-term personal loan is an unsecured loan with a term of 60 months or more. As with a typical personal loan, a long-term personal loan will need to be paid back with interest.

A personal loan can be borrowed from banks and credit unions, and can be taken out for a variety of reasons, such as to:

  • Cover the cost of a necessary expense like a car repair bill
  • Consolidate debt, which lumps multiple debts into one using a new loan with different terms
  • Refinance debt, which could lower the rate you pay on an existing debt
  • Pay for a big-ticket item, such as the cost of a wedding

Pros and cons of a long-term personal loan

So, when is it a good time to take out a long-term personal loan? In general, a long-term personal loan is a good option when you’re concerned with keeping your monthly payments low. If you’re strapped for cash each month due to multiple debts, for example, a long-term personal loan could allow you to combine those debts into one with a longer term and lower monthly payment.

The major downside to a long-term personal loan, however, is that you’ll pay more in interest over your repayment term compared with a loan with a shorter term. Consider the following example:

A five-year loan of $10,000 with a 5% APR will accrue $1,323 in interest over its term. Take out the same amount over a three-year term, and the accrued interest drops to $790. While the monthly payments will be higher, you can save more than $500 by opting for a shorter term.

You may also consider the following pros and cons. Note that some of these pros and cons apply to personal loans in general:


  • If you’re using a personal loan to improve your finances, the credit bureaus may consider it a “good debt.”
  • Whether consolidating or refinancing debt or borrowing to cover an unexpected expense, a long-term personal loan can come with lower monthly payments due to their longer repayment terms.
  • As with typical personal loans, consolidating or refinancing your debt with a long-term personal loan could yield a lower interest rate.


  • A long repayment term means you’ll pay more in interest over time compared with a shorter-term loan with the same interest rate.
  • Some lenders charge prepayment penalties, which means you’ll pay fees for paying off your debt early.
  • Origination fees, which may be charged when you take out a personal loan, add to the total cost of your loan.
  • A longer term means you’ll have to accommodate for the debt for much longer than with a shorter-term loan.

While a long-term personal loan can be a great financial tool when used correctly, it is not always the best option. Making the decision to take out a long-term loan means taking on a monthly payment you must pay on time, every month, for five years or more. Your monthly payments may be smaller if you opt for a longer term, but you must also consider the amount of interest you will pay over the course of the loan.

The perfect loan term is going to vary depending on your needs and situation, but savvy borrowers should make sure any long-term personal loan they take out doesn’t have any prepayment penalties, in case they want to pay it off before their agreed-upon term is up.

How to get a long-term personal loan

Ninety percent of lenders consider FICO credit scores when determining a potential borrower’s ability to pay back their loans. Before you take out a personal loan, it’s important to check your FICO credit score.

Borrowers with scores under 640 may have a difficult time in securing a loan, and if you don’t check your credit before you apply, you’ll be unable to correct any mistakes that may be on your credit report. Checking your credit score once a year is recommended to ensure your report is accurate and up to date.

You’ll also want to consider your budget and reason for a long-term personal loan. Ask yourself the following questions:

  • Can you afford the monthly cost a long-term personal loan? You can use our calculator to get an idea of loan payments.
  • Are you willing to be in debt for longer, or does a personal loan with a shorter term make more sense for you?
  • Will a long-term personal loan be worth the added interest costs?
  • Do you need a personal loan at all, or could you tighten your budget and pay with cash instead?

If you’re prepared to move forward, you’ll need to research your options. Getting preapproved can also give you a glimpse of the rates and terms for which you may qualify. However, not all lenders allow you to submit to a soft credit check to review rates.

Be sure to consider each lender’s terms, conditions, rates and fees before moving forward with any of them. Once you decide on a lender, you’ll submit to a hard credit check to confirm your eligibility for a loan. If you’re approved and you accept your new loan terms, you’ll receive funds. Some lenders release funds quickly, such as the next business day, while others may take a few days or longer.

Lenders offering long-term personal loans

Once you’ve made the decision to take out a long-term personal loan, it’s a good idea to shop around and find the best fit for you.

Here’s a look at a few lenders from the MagnifyMoney personal loan marketplace. (Disclosure: MagnifyMoney is owned by LendingTree.) You may or may not qualify for these lenders. However, this list can provide you with a glimpse at what some lender offer borrowers:

    • SoFi: Through Sofi’s online service, you can apply for preapproval on a long-term personal loan. With unemployment protection and no upfront fees, SoFi may be a great option for a long-term personal loan.
    • Marcus by Goldman Sachs®: Goldman doesn’t charge late fees and offers the option for payment deferral.
    • USAA Bank: With no origination or application fees, USAA Bank may be a great option for military or federal government workers and their families looking to secure a long-term personal loan. If approved for a loan, you could get the cash in as quickly as 24 hours.
    • Discover personal loans: When consolidating debt, Discover may be an excellent option for long-term loans. Discover offers the option to have them pay the creditors directly, simplifying the debt consolidation process. The loan terms are 36 to 84 months.
    • LightStream: With loan terms of 24 to 144 months, LightStream is another great option for a long-term personal loan. The lender may fund your loan the same business day you’re approved.

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