There are so many loans available that it is hard to know which one is right for you. You may want to consider a long term loan if you want to borrow a lot of money at a lower interest rate. This loan is for home renovations, medical bills, or even to consolidate credit cards.
What Is a Long Term Personal Loan?
Personal loans with long term repayment terms last for at least five years. The terms of most personal loans range from five to seven years, though some lenders offer up to 12 years. A long term loan typically has a higher interest rate than a short-term loan. Long term loans have this drawback when compared to short-term loans. Long term loans, however, offer lower monthly payments, which are easier to afford for borrowers. For example, someone applies for an RM20,000 personal loan and receives two offers: The first one has 5% annual interest and RM461 monthly payments for a four-year term. With the second option, it is an eight-year term, the APR is 10%, and the monthly payment is RM303. The lower cost fits better into your budget, so you choose the eight-year loan. However, it is essential to note that you would pay more in interest while the monthly payments would be lower.
Long Term Personal Loans: When To Consider Them?
It would be best to think about your budget and how much you want to borrow before attempting to go for a long term personal loan. You should consider taking out a long term loan if:
Borrowing a Large Sum Of Money Is Necessary
You may not have enough credit available on the card if you have medical bills, home repairs, or other significant expenses. On the other hand, you might have enough credit but won’t be able to pay the balance off quickly enough to avoid super-high interest charges. Long term personal loans may allow you to borrow up to RM50,000 and repay it over five to seven years, depending on your credit history and the lender’s requirements.
A Lower Monthly Payment Is Important To You
Your monthly payment is usually cheaper when you borrow the same amount over a longer-term than you would for a shorter-term loan. Remember, however, that long term loans will likely cost you more in the long run since you’ll pay interest over a more extended period.
The Benefits And Drawbacks Of Long term Personal Loans
There are several benefits and drawbacks to taking out long term loans. Before applying for a long term personal loan, here are a few things you need to know.
Benefits Of Long Term Personal Loans
- The monthly payments are often lower than those of a short-term personal loan.
- On top of other bills and debts, it’s easier for borrowers to manage long term personal loans that allow them to borrow large amounts.
Drawbacks Of Long term Personal Loans
- Long term loans typically have higher interest rates, which increases the total interest paid.
- A good credit score is required.
- There may be difficulties finding a lender who offers long term loans.
- Early repayment may incur a prepayment penalty.
Bottom Line
Getting a long term personal loan can be advantageous if you need to borrow a large amount of money and wish to repay it over a long period. However, because it can be more expensive in the long run, you should consider less-expensive alternatives that you may find more suitable.
