When a long-term personal loan makes sense
A long-term personal loan can help when making large purchases or consolidating high-interest debt.
- Debt consolidation: A long-term personal loan could be a less expensive alternative for debt consolidation than a high-rate credit card. It might also reduce your payments if you consolidate existing loans into a longer-term option.
- Large purchases: If you plan to make a large, necessary purchase, such as replacing the roof on your house, a long-term personal loan can make the cost more manageable.
- Major life events: Paying for major life events, such as a wedding or a cross-country move, can be easier with a long-term personal loan.
When a long-term personal loan might not make sense
Long-term personal loans might not be ideal for smaller purchases or when your finances are unstable.
- Short-term needs: If you have short-term needs, such as a medical bill or a small home repair, a long-term personal loan with a relatively high rate might not be cost effective.
- Depreciating assets: Items such as electronics can depreciate quickly, increasing the chance of being underwater on a long-term personal loan.
- Variable income: You might be more likely to fall behind on payments if your is variable, such as with freelancing or gig work.
- Bad credit: Some lenders offer long-term personal loans for bad credit, but interest rates will likely be higher, increasing borrowing costs.
6 steps for getting a long-term personal loan
If you want to apply for a long-term personal loan, here’s how the process typically works.
1. Check your credit
Check your credit score through your credit card issuer, bank or one of the three major credit bureaus. Visit AnnualCreditReport to access your reports and review them for accuracy. The higher your credit score, the better your loan offer is likely to be.
2. Determine your budget and needs
Estimate the amount you need so you don’t under- or over-borrow. Lenders also typically ask how you intend to use the loan, so be sure to have that information ready.
3. Prequalify
Prequalify online with three to five lenders. When you prequalify, lenders typically provide one or more loan options, including details about monthly payments, interest rates and repayment terms. It is not a formal offer of credit, but it helps you know what to expect from each lender.
4. Apply
Choose the lender with the best prequalified offer and submit an application. Many lenders also let you apply online.
5. Provide required documentation
The lender will likely request supporting documents, which might include proof of identification, income and address. If the lender asks for additional documentation, send it promptly to avoid delays in loan processing.
6. Review and accept the loan agreement
If you meet the lender’s eligibility requirements, you might receive a loan offer within a few days. Carefully review the agreement, including the interest rate, repayment term and loan fees. Sign the loan agreement to accept the offer if it’s as expected. Loans are typically funded within a few days of acceptance.
Alternatives to long-term personal loans
Depending on your situation, some financial products might be better options than a long-term personal loan.
- Home equity loan: A home equity loan uses the equity in your house as collateral, which might result in a lower interest rate. However, your home can be repossessed if you default.
- Home equity line of credit: A home equity line of credit also uses the equity in your house as collateral, but it works like a credit card. It provides a revolving account that lets you borrow up to a credit limit.
- 0% annual percentage rate credit cards: A 0% annual percentage rate credit card has no interest charges during an introductory period, which typically lasts several months.
- Peer-to-peer loans: A peer-to-peer loan lets you borrow money from individuals. These loans might have lower interest rates than bank loans, especially if you have poor credit.
- Friends and family loans: A friend or family member might be willing to lend you the money. However, these loans can strain your relationships if you aren’t able to repay them.
How Buy Side rates long-term personal loans
We analyzed data points from more than 30 lenders, including traditional banks, credit unions and online lenders, and assigned ratings on a scale of 1 to 5 stars. Our pool includes partner lenders, but partners don’t compensate us for ratings or influence the outcome of our ratings.
We chose six factors and weighted them based on our expert assessment of their importance to readers. Lenders with the highest point values were assigned 5 stars, with the lowest-scoring companies receiving 1 star. Buy Side’s best long-term personal loans are from our top-rated lenders offering repayment terms of at least 84 months. Learn more about how Buy Side rates personal loans using data-driven methodologies.
