How do long-term personal loans work?
Long-term personal loans are regular personal loans with loan terms of between five and seven years. They’re no different from other standard personal loans in terms of the way that they’re structured: you can borrow an amount between up to $50,000 and repay it with interest over a set term.
These loans are more common for, and useful to, borrowers who are looking to take out a larger loan (closer to $75,000 than $2,000), as they benefit more from a lengthier period of repayment than smaller amounts do. Smaller loans of less than $10,000 are more likely to be able to be paid over a term of less than five years, so it makes more sense to pay them over a shorter term and save money.
However, it's important to note that the length of your loan term will correlate to your borrowing profile. Because longer-term loans are considered a greater risk than short-term ones (as there is, in theory, an increased likelihood of something occurring over your term which affects your ability to repay it), they're generally harder to get approval for. If you have a strong credit score and are earning a stable, comfortable income, you're more likely to be approved for a long-term loan.
Types of personal loan
With an unsecured personal loan, you can potentially borrow as much as $75,000 without the need to attach any valuable assets, such as your car, as security. These loans are the most widely available and often the quickest, with same-day approval possible.
Secured personal loans, on the other hand, make use of collateral. This lowers your risk profile in the eyes of a lender, potentially lowering your interest rate and expanding your borrowing power beyond what you may be able to get through an unsecured loan.
Variable interest rates remain open to fluctuation during your term. This means you can benefit from decreasing rates and save on your loan if the market heads in that direction, although you’ll also pay more if rates start rising.
Fixed interest rates are locked at the beginning of your loan and remain constant throughout your repayments. This acts as a valuable protection against interest rate increases, as your loan will be unaffected, but you’ll miss out on potential drops as well.
If you’re paying off multiple debts at the moment, particularly those with high interest (such as credit card debts), consolidating them into one payment can not only make them more convenient to manage but also potentially save you money overall.
Looking to take off on a holiday with your family but want to pay it off at your own speed? Travelling can be expensive, so you can distribute the cost of your next trip over a period you’re more comfortable with by taking out a personal loan to pay for it.
There are so many costs that go into making your dream wedding a reality, from venue hire to catering to dresses and suits and so much more. By taking out a personal loan, you can start planning the big day you want, even if you can’t pay for it upfront.
Home improvements are desirable for a range of homeowners to help keep their living space fresh and interesting, not to mention increase its value. You can get past the financial hit of renovations with a personal loan paid in instalments.
Personal loans aren’t limited to PAYG employees, though. If you’re running your own business, you can still be approved for financing by submitting tax returns and other alternative documents instead of payslips and utilise your funds however you wish.
There’s a variety of expenses which come with being a student, ranging from the cost of your courses, textbooks and computer to your accommodation. Taking out a personal loan can make these costs more manageable by spacing them out.
Some lenders offer green personal loans, which are designed to be used for energy-efficient appliances and products such as solar panel and air conditioning installation in your home. You can qualify for lower interest rates and fees with this loan.
Why compare personal loans through Savvy?
How do I compare between long-term personal loans?
Getting the right interest rate is particularly important on a long-term personal loan, as the difference between a good and bad one is likely to be thousands of dollars. Ensure that the interest rate listed on the top personal loan offers is front of mind for you at the comparison stage.
While interest is important, fees are just as crucial to try to avoid. These can set you back if you’re charged an expensive upfront fee, such as an application fee of up to $600, or can accumulate over time with monthly fees of $10 to $15. Ensure that your loan waives or reduces as many fees as possible to save you money.
If you want a long-term loan, you’re probably looking for a larger loan sum. As such, you should compare what different lenders are willing to approve you for. However, if you do want a loan on the smaller side, it’s worth checking what the minimum loan requirements are for each lender.
Not all loan terms are the same between lenders; some will cap their loans at seven years, while others may opt for five. Your preference regarding the period over which you wish to repay the loan will dictate which lenders are and aren’t suitable for you.
The benefits of long-term personal loans
Breaking down your personal loan into more manageable chunks can ensure that making repayments is made that much simpler by not eating into your funds too much for each instalment.
Frequently asked long-term personal loan questions
Helpful personal loan guides
Still looking for the right personal loan?
Personal loans come in all shapes and sizes, so read more about the ways you can use them, as well as how they might work for you.