What Personal Loan Term Length Should You Choose?

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What Personal Loan Term Length Should You Choose? – If you’re considering taking out a personal loan, you might get stuck when it comes to selecting the right loan term length. If you seek answers to what personal loan term length to choose, you have come across the best piece of writing today. Choosing the right loan time length for a personal loan will ultimately help you to manage your finances effectively.

What Personal Loan Term Length Should You Choose?

This article aims to educate our readers on the right personal loan term length to select when taking out a personal loan. Whether you’re opting for a shorter term or a longer one with lower payments, it is important to choose a loan term length that suits your financial goals and capabilities.

What Is A Common Personal Loan Term Length?

Most lenders offer personal loans and expect it to be paid between two to seven years. This is just the general length for personal loans, it varies by lenders. Some lenders may decide to have their personal loan term length be a year while others can have a prepayment period of 10 years and above. It depends on the purpose for which you are taking out the loan and the principles that guide the loan term of your lender.

It is also important to be aware that your interest rate is dependent on the personal loan germ you choose. If you select longer loan terms, be prepared to be charged higher interest rates. On the other hand, lenders charge lower rates on short loan terms. Whatever reason you are taking out a personal loan, ensure you factor in the interest you are to pay on the loan.

How to Choose a Personal Loan Term Length

The choice of personal loan term length is dependent on your need and other situations surrounding your decision to take out a personal loan. The ideal loan term anyone can work with is a short loan term, simply because it is easier and affordable to repay.  You can choose a shorter loan term if;

  • You intend to save money on interest
  • You plan to pay off the loan fast.
  • You’re borrowing a small amount of money.
  • You are capable of paying a high monthly payment.

On the other hand, you can choose a longer loan term if;

  • You’re borrowing a huge amount of money.
  • You need enough time to pay off the loan.
  • You want to pay every month for the full loan term.

In all, when choosing a loan term length, ensure you strike a balance between your needs and your ability to repay your loan. For those with emergency needs, evaluate your financial situation properly before deciding on the loan germ to opt for.

What to Consider When Choosing a Personal Loan Term

Loan Amount:

Based on statistics, small amounts of money are easier to repay within a short period while large amounts of money are often difficult to repay. When choosing a personal loan, evaluate your financial capability to determine the loan amount you’re taking out.

APR:

Another important thing to consider when choosing a personal loan term is the APR offered by the lender. When making comparisons of personal loan offers, ensure you carefully review the APR at different loan term lengths.

Monthly Payments:

Before choosing the length of your loan terms, ensure you can afford the monthly payment schedule for the full loan terms. Most personal loans include charges for late fees if you’re unable to meet up with payments. So, ensure you are in good standing with the monthly payment specified on your loan term.

Interest:

Ensure you calculate the total interest before taking out a personal loan. If your loan offer does not highlight the total interest cost, you can make use of a personal loan calculator to see how much interest you have to pay. By doing this, you would be able to know if you can meet up with the overall cost of your loan.

Furthermore, you should also consider potential changes to your future budget. Most personal loans are fixed-rate loans, meaning the monthly payment remains the same throughout the lifespan of the loan. If you plan on having less cash flow in the upcoming month or years, a loan with lower monthly payments is a wise choice.

How to Get a Personal Loan

It is important to have a basic understanding of how to apply for personal loans before proceeding with the loan application. Highlighted below are steps on how to get a personal loan;

Check Your Credit Score

The first thing you need to do before applying for a personal loan is to review your credit score. Your credit score is an important requirement to qualify for a loan from most lenders. Perhaps you notice any wrong information on your credit; you can reach out to experts on how to correct them.

Shop Around

The next thing is to shop around and compare loan rates from multiple lenders such as traditional banks, online lenders, and credit unions. By shopping around, you will be able to find the best offer that aligns with your needs and budget.

Prequalify

A lot of lenders grant you the opportunity to prequalify for a personal loan so that you can see your interest rates online with no significant effect on your credit score.

Compare loan offers

Once you’ve prequalified for a personal loan across different lenders, the ideal thing to do is to compare each loan offer to decide on which is best for you. Don’t just settle for the first lender you come across, compare the interest rate, loan term, and monthly payment. All of this is to ensure that the loan offer suits your personal needs and budget.

Submit a Complete Application

As soon as you have decided on the lender to work with, the next step is to submit your loan application. Fill out the loan application form provided by the lender; ensure you input the correct personal details and other documents required by the lender.

Once the loan is approved, the loan amount will be disbursed to your account. The lender will then set up a repayment plan for you, usually every month.

FAQs

How Long Does It Take To Repay A Personal Loan?

Generally, most personal loan repayment terms are between two to seven years. However, repayment term varies; it depends on the lending institution you are taking out a personal loan from. Some lenders have strict repayment terms while others are flexible. Before taking out a personal loan from any lender, ensure you understand the repayment terms.

Can You Get A 10-Year Personal Loan?

As mentioned earlier, most personal loans can be paid between two to seven years but some lenders may offer 10-year repayment terms if you are taking out a loan to work on home improvement projects.

Is It Possible To Change My Personal Loan Term Length?

Most loan term length is fixed so you might not be able to change the length of your personal loan term. However, there are other options you can opt for, such as refinancing your loan. Your lender may allow you to refinance your loan to replace it with a new loan that has a different term from the one you previously had.

Can I Pay Off A Personal Loan Early?

Of course, you can pay off your loan earlier than the due date specified by your lender. You can make extra payments throughout the month; this often brings a form of relief knowing that you do not have any pending debts.

While most lenders don’t charge a prepayment penalty, it is essential to still check your loan agreement to be sure you can pay off your loan early enough.