Long-term loans can be a helpful option if you want to borrow money, but don't have the cash available for it at the moment. These loans will mean that your monthly payments are smaller, which is an attractive feature. However, long-term loans also cost more in interest over time and can end up costing you more than what you borrowed in the first place! Before applying for a long-term personal loan, know what these loans entail so you can decide whether or not they're right for you.
In Canada, a long-term loan is a loan that has a repayment period of 5 to 7 years. Mortgages and student loans are other types of long-term loans with longer repayment periods.
When it comes to personal loans, those with repayment periods over 72 months can be harder to find but lenders do offer them for certain types of financing, like home improvement.
We recommend knowing the terms and conditions before applying because long-term loans tend cost more in interest than short-term ones.
With longer repayment periods, long-term loans can help you consolidate your debt and make payments more manageable. The downside is that they have much higher interest rates — which will end up costing you a lot of money in the long run if not paid off quickly.
Long-term loans are also difficult to qualify for, with credit requirements often exceeding what’s necessary for other types of financing options like payday or balance transfer cards.
Plus, it may be tempting to keep adding to your debt without realizing how damaging this could be on your finances down the road. If you do want an alternative option such as a personal loan over another form of financing, consider using a shorter term length rather than opting into something like a 30 year plan.
If you're facing large expenses, home repairs or medical bills, long-term loans might be your best option.
Payday alternative loans typically aren't enough to cover these types of expenses because they're only available in smaller amounts and have more restrictions. A long-term loan from a traditional lender may require credit scores that are higher than a payday alternative loan would for approval but can offer larger loan amounts with better rates. If you don’t want to take out a long-term personal loan, consider using another type of financing like an installment plan or home equity line of credit.
Regardless of which type is right for you, the most important thing is getting educated about what each one entails so that you make the best decision based on your needs.