How to choose the right personal loan term length

Personal loan are more popular than ever, as evidenced by personal loan originations reaching record highs. In fact, total personal loan balances have increased 26% year over year. If you’re thinking of joining the millions of borrowers using personal loans to consolidate debt or finance home improvements, you may be unsure what loan terms to look for when reviewing your options. Personal loan term lengths can significantly impact your monthly payment, interest rate, and overall repayment cost.

How long is a personal loan term?

A personal loan is a type of loan you can use for a variety of purposes, including debt consolidation, home renovations, travel, or even a dream wedding. These loans are typically unsecured, so there’s no need for collateral to secure the loan.

Personal loans are installment loans, so you make monthly payments over the loan’s term. Lenders can decide what loan terms they can offer, so terms vary by lender. Most lenders have terms between 24 and 60 months, though some do offer longer-term options, such as 72 or even 84 months. The longer terms are generally only available to borrowers with good to excellent credit.

How term length affects the terms and conditions of your personal loan

With most personal loan lenders, you can choose what loan term you want when applying. When choosing a term for your personal loan, it’s important to understand how the loan term affects you:

Your monthly payment is dependent on it

Your personal loan payments depend on your loan amount, annual percentage rate (APR), and the loan’s term. Generally, the longer the loan term, the lower your monthly payment. For example, below are your payments for a $10,000 loan at different terms. For the sake of the example, the loan options have the same rate.

Example: How much interest will I pay?

A longer loan term may lower your monthly payment but will cost you more

Term length

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