Personal loans are often seen as short-term. And for the most part, a lot of personal loans do have relatively short repayment periods. But sometimes, lenders will offer personal loans that cover numerous years. This is what you call a long-term personal loan.
What Is a Long-Term Personal Loan?
A long-term personal loan is a loan that has a repayment period that exceeds the traditional two years. It could extend to up to 15 years or more. There are lenders that even offer loans with longer terms. But the loans are very rare.
Why Do People Need Long-Term Personal Loans?
When people need a long-term personal loan, it’s not because they need the money for a long time. For the most part, the loan has a relatively short repayment period. It is just that the borrower can’t repay the loan within a short time frame.
In some instances, the borrower might be getting a short-term loan to bridge the time until they get a bigger loan. While they wait for the larger loan, they need to repay the previous loan. Or it might be an enterprise startup. They might be getting a loan to get the business going. They might need to repay the loan over a long period of time until the business takes off.
What Are the Advantages of Long-Term Personal Loans?
Aside from the obvious advantage of getting a loan with a longer repayment period, the borrower will also be getting a lower interest rate. This is because long-term personal loans are typically given out at a lower interest rate. Since the borrower will not repay the loan for a long time, the lender has no reason to charge a high-interest rate.
Some long-term personal loans don't come with any interest at all. The lender might just require borrowers to pay back the borrowed amount. Some lenders also offer a low-interest rate with a long-term personal loan. Depending on the borrower's credit history, getting an interest rate of less than 10 percent is easy.
What Are the Disadvantages of Long-Term Personal Loans?
While there are numerous advantages of getting a long-term personal loan, there are also several disadvantages. One of the biggest disadvantages of getting a long-term personal loan is that the borrower might not be able to get the loan. Depending on their credit history, they might not be able to get a long-term loan in the first place.
Aside from that, borrowers will also have to repay the loan sooner or later. Even if they only have to repay the loan after a few years, they still have to start paying it on time. And if they end up missing a few payments, they will have to deal with higher interest rates, late fees, and potentially being blacklisted.
Another disadvantage is that some lenders will lend borrowers only a limited amount. This could be an amount of money that is lower than the usual $1000 to $5000. So if you need more than $1000 but less than $5000 to spend on your loan, you might not be able to get a long-term personal loan.
Long-term personal loans are a great option for many people. They can get a loan with a lower interest rate. And they also get to deal with a longer repayment period. But before you go for a long-term personal loan, make sure that you are able to repay the loan in a timely manner. If you can’t, you might end up losing your collateral.
Get the financing you need from Bessemer Finance Company. We offer various personal loans in Bessemer, AL. We will work to review our different options and, upon approval, put clients on an affordable payment plan. Apply now!