Tips for choosing a personal loan term length.
As a consumer, you have many choices when it comes to borrowing money if you have good credit. A personal loan is one of the most flexible options for borrowing. Unlike credit cards, personal loans have fixed interest rates. With auto loans or mortgages, you can only borrow for one purpose. With personal loans, you can borrow money for just about any expense.
Unlike other types of loans, there are also personal loan lenders who will lend to borrowers with lower credit scores. Uprova is an example of a lender that works with borrowers from all types of credit backgrounds.
One other benefit of personal loans is you may have the opportunity to choose your term length.
Why does personal loan term length matter?
A personal loan term length is the amount of time you have to repay your loan. There are pros and cons to having a lower term length. A longer term could decrease the amount you owe each month in loan payments. However, with interest, the longer the loan term, the more you will pay overall.
What to consider
Here are three things you should consider before choosing how long your personal loan term should be.
1. Your budget.
When applying for a personal loan, you should consider the total amount you will owe, but you should also consider your monthly payment. It’s important to review your budget and determine if you can afford your monthly loan payment. While a shorter term length will mean paying less overall, it won’t help you if you can’t afford the monthly payment. Missing a payment can result in fees, additional interest, and could harm your credit score.
2. Other loans.
If you are considering buying a home or new car soon, you should consider a shorter personal loan term. Lenders will run a credit report before approving your loan and setting your rate. If you have an outstanding personal loan, it could impact your chances of getting approved or increase your interest rate. Paying off your loan before you apply for other funding could improve your credit score.
3. You can sometimes pay off loans early.
Another thing to keep in mind when choosing a personal loan term is that some lenders won’t charge you a fee if you decide to pay off your loan early. That means you could choose a longer term to give yourself some wiggle room, but work towards paying off your loan early and saving on interest. At Uprova, we won’t charge you if you pay off your personal loan early.
Personal loans are more flexible than other types of funding. Some personal loans have flexible repayment options where you can choose a longer or shorter repayment period. When choosing your personal loan term length, consider your budget, if you plan to apply for another loan soon, and if the lender allows you to pay off your loan early.