Personal Loans

Long-Term Loans: What to Know and Where to Shop

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Although there isn’t a firm rule about what constitutes a long-term loan, it’s often defined as a loan with a term that is at least 60 months long. This extended repayment period has its pros and cons: while borrowers may end up paying more in interest over the years, their monthly costs are usually lower with a long-term personal loan as compared to a shorter term loan of the same amount.

3 long-term loans to consider

Long-term loan companies can provide borrowers with lower monthly payments than they might find elsewhere. But just because you’re paying less per month than you would with a shorter term doesn’t mean you should settle for just any loan. You’ll want to look for low or no fees, a high enough borrowing limit to meet your needs and an APR that you’re OK with paying.

Here’s an overview of three long-term loan options you may want to consider: Marcus by Goldman Sachs®, Discover Bank and LightStream personal loans.

Long-term personal loan lenders
Marcus by Goldman Sachs® Discover Bank LightStream
APR range 6.99% to 19.99% 6.99% to 24.99% 3.99% to 19.99%
Loan terms 36 to 72 months 36 to 84 months 24 to 144 months
Loan amount Up to $40,000 Up to $35,000 $5,000 to $100,000
Fees None Late fee of $39 if payment is not received in full by the due date None
Minimum credit score requirement Not specified Not specified Not specified

How to get a long-term personal loan

  1. Figure out how much money you need, and how much you can afford to pay each month toward a loan.
  2. Gather your needed documents, most likely including proof of income and identity, and check your credit score to determine long-term loan eligibility.
  3. Shop around with lenders by comparing available terms and fee structures. Many lenders allow you to prequalify (which doesn’t impact credit score) to help you figure out your long-term loan eligibility and what types of terms you may qualify for.
  4. Narrow down your options, comparing long- and short-term loans to make sure you select the best option for your situation.
  5. Complete and submit your application.
  6. If approved, accept the loan and begin repayment.

What to consider before getting a long-term personal loan

As with any financial product, you’ll have to weigh the terms of a long-term loan and decide which option fits your finances.

One way to decide is by doing the math to see what your monthly payments would be given a certain APR, borrowing amount and repayment term. That exercise can help you determine what the longest term for a personal loan you’re both comfortable with and makes financial sense. If, for example, you figure out that you would be paying more interest over the life of the loan than you believe is worth it, you may wish to consider a shorter term.

Check the math: Short- vs. and long-term loans

Long-term loans can make the monthly repayment process a little less painful since you’d be paying back a lower amount each month. However, over time, that adds up in the form of interest — even if you were to secure the same APR and fee schedule. In some cases, that can turn a decent loan into a considerably larger financial obligation that prevents you from doing other important things, like saving for retirement.

You’ll have to decide what you’re comfortable with before you commit. You’ll also have to consider the innate difference between short-term and long-term loans and how that applies to your financial situation. And if you do ultimately decide that long-term loans are a good option for you, be sure to shop around for competitive terms.

Long-term loans for bad credit

Secured personal loan

Secured personal loans allow borrowers to use things they own as collateral. That can lessen the necessity of stellar credit to get a lower interest rate and provide a source of long-term loans for bad credit. On the other hand, that means your collateral could be in jeopardy if, for example, you were to miss a payment. This is extremely dangerous if you plan on using your home, or another necessary asset, as collateral.

  • OneMain Financial: APRs range from 18.00% to 35.99%. Qualified applicants can take out up to $20,000 and terms from 24 to 60 months.
  • TD Bank: APRs are variable and equal to 2% plus the current prime rate. As of March 2020, the prime rate is 4.75%. Borrowers can take out up to $50,000, though specific rates and terms can vary depending on where you live, as well as your desired borrowing amount and repayment term.
  • Mariner Financial: APRs range up to 35.99%. Applicants can see if they qualify for an unsecured loan or a secured loan at the same time, and those who qualify can borrow up to $25,000.

Home equity loan

A home equity loan is a loan taken out against earned equity on a home, with interest rates that are typically lower than you’d find with something like a credit card. You’ll have to have a considerable amount of equity built up to get one, however, either by paying down your mortgage or if the value of your home increases. You’re also typically capped at borrowing 85% of your established equity.

To qualify, you also should have a debt-to-income (DTI) ratio below 43%, and the lower the better. Though it will be easier to qualify if you have good credit, you may still be able to get a home equity loan with bad credit, especially if your other financial stats, like your DTI ratio, are solid.

Home equity line of credit (HELOC)

A home equity line of credit, or HELOC, gives homeowners access to about 80% to 90% of their equity to use and repay with interest. Unlike a loan, there is a specified period during which you can take out money (known as a “draw period”), followed by a repayment period, which is when you’d start paying back the loan as well as the interest. There are also associated closing costs, which are similar to the ones you paid when taking out the original mortgage.

To get a HELOC, you’ll need to have a loan-to-value ratio of about 80% and enough income to cover your usual mortgage payment as well as the new payments. A HELOC, like a home equity loan, can be an option for borrowers with less than perfect credit, provided their other financial information is solid.

 

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