How long can you finance a personal loan

By Matt Mayerle
Modified on June 7, 2023
how long can you finance a personal loan

How long can you finance a personal loan? The answer depends on your financial situation and needs. For example, if you only need a small loan of a few hundred dollars, you may be fine with financing your personal loan for just a few weeks. But, if you are looking for a larger loan amount, it may be best to finance your loan for a few months or even years. 

What Is the Best Term Length for Personal Loans?

When researching personal loan lenders and financial products, think about why you are searching for funding in the first place. Do you need a high or low loan amount? Are you looking to pay back your loan over the course of a few weeks or a few years? How much do you want to pay for your personal loan in total? Are there lenders offering any extra perks or incentives that would make them a better choice for your personal loan needs? These questions will help you determine if a long-term or short-term financing plan will work best for you. 

Personal Loan Interest Rates

Perhaps the most crucial factor affecting your personal loan terms is the interest rates. Personal loan rates may come in the form of variable or fixed interest

Variable interest causes rates to fluctuate, meaning borrowers may pay more or less each month, depending on the market. Fixed interest means rates stay consistent throughout the life of the loan, resulting in equal monthly payments for the borrower. 

Monthly Payments for Your Personal Loan

Think about your budget and what a reasonable monthly payment would look like for you. If you want to keep your monthly payments small and manageable, you may want to consider a long-term personal loan plan. 

Repayment Period for Personal Loans

Knowing how much money you are looking to borrow will help you decide upon an appropriate repayment period. Short-term loans are best suited for small funding amounts, while long-term plans work best for borrowers taking out larger amounts. 

Extra Lender Incentives 

Some lenders will try to entice borrowers to get a personal loan via their services by offering perks or incentives. For example, some lenders will offer discounted rates for borrowers who sign up for a loan with automatic payments. 

Finding the Right Personal Loans

Not all personal loan options are the same. There may be different terms, rates, and loan amounts available to borrowers depending on factors like their credit score and income. 

Check out some common options borrowers turn to when they need a personal loan lender. 


Applicants with high credit scores and a clean credit history may consider applying for a personal loan with a bank. Banks usually have very strict minimum credit score requirements and may immediately deny an application if they see the borrower doesn’t have a good credit score.  

Bank loans may also come with origination fees. An origination fee is an extra charge borrowers must pay to their lender at the time of signing their loan contract. The origination fee will often be included in the total balance of the loan.

Credit Unions

A credit union is a financial institution run by its members. Credit unions typically only extend loans to other members, so if you want to get a personal loan, you will have to join. To become a member of a credit union, you may have to meet specific criteria involving factors like: 

  • Your occupation. 
  • Your credit score/financial history. 
  • Where you live. 

Online Lenders

Direct online lenders may be one of the most accessible options for borrowers looking for personal loans. Online lenders offer a completely virtual process, allowing borrowers to apply, work with a loan agent, and receive loan funding without ever having to leave their homes.

Online personal loan lenders are also known for offering a wide variety of financial products and services. This means that borrowers with excellent credit, poor credit, or even no credit have access to online personal loans. 

Payday Lenders

Payday loans are a type of unsecured loan designed to connect people to extra cash while they are waiting for their next paycheck. Usually, payday loan terms range from one to two weeks. Borrowers who don’t pay back their pay day loan within this time frame may have to deal with higher interest costs, making the loan funds all the more difficult to pay off. 

Unless you can pay off your total balance within about two weeks or less, payday lenders may not be the best place to get your desired loan. 

Car Title Lenders

Title loans are secured loans that typically come with low loan amounts and extremely high-interest rates. Borrowers must also give up partial ownership of their vehicle while they pay back title loans. 

When borrowers sign their title loan contract, their lender will also sign onto their vehicle title as a lien holder. Being a lien holder gives title loan lenders the right to repossess a borrower’s vehicle in case they miss payments or default on their loan. If you don’t want to have to put any of your property at risk, be sure to only look at unsecured loan options.

What Kind of Credit Score Do You Need for a Personal Loan?

There is no official minimum credit score requirement when it comes to personal loan approval. However, credit approval odds increase significantly for borrowers with tier one credit scores. Tier one credit is the highest level of credit a consumer can have. 

In order to achieve tier one credit, borrowers must have a long-term history of making payments on time, reducing their debt, limiting their hard credit inquiries, and keeping financial accounts open. When borrowing money, applicants with tier one credit may also receive a lower interest rate and higher funding amount. 

Fortunately, if you are looking to boost your credit, a personal loan may be able to help you! You can even check on your progress by requesting a soft credit inquiry when you are about halfway through with paying back your loan. 

Below are some tips on ways you can use a personal loan to improve your credit score. 

Make Your Monthly Payments on Time

Your payment history has the biggest impact on your credit report. When you consistently make your loan payments on time, you are establishing a positive payment history. This means that even with a bad credit personal loan, you may still be able to see an increase in your credit score as long as you keep up with your monthly installments. 

Reduce Your Debt-to-Income Ratio

Your debt-to-income ratio refers to how much existing debt you currently owe compared to your income. As you pay off your loan, you are also working toward improving your debt-to-income ratio. Receiving a pay raise or landing a new job that pays a higher salary is another way you can improve your debt-to-income ratio. 

Avoid Apply for New Loans or Credit Cards

Every time you apply for a line of credit, such as a loan or credit card, your credit score takes a hit. If you already have a personal loan, try not to apply for additional funding until you have paid back your loan. 

Keep Financial Accounts Open, Even if You Don’t Use Them

Credit bureaus also track how long consumers have had active financial accounts. The longer an account has been open, the more a consumer’s credit score will benefit. This is why closing a credit card may affect your credit if that account is your oldest standing financial account. 

As long as you are able to spend responsibly and maintain healthy financial habits, you should try to keep all your financial accounts open. 

Personal Loan Calculator

You can calculate your personal loan monthly payment amount by using the following formula:

P * ( r * (1+r)n ) / ( (1+r)n-1)

In this formula, “P” represents your loan amount, “r” represents your interest rate, and “n” represents the number of installments it will take to pay off your personal loan. 

You can view all of this information on your loan contract and calculate your monthly payments yourself, or you can reach out to your lender and have them do it for you. In fact, you can even request that your lender provides you with a full schedule that maps out each monthly payment, including each due date and amount due. 

How To Extend Your Personal Loan Terms

If you are having trouble keeping with your existing loan terms, don’t worry, there are steps you can take to make paying back your personal loan more manageable. 

Request a Personal Loan Term Extension

You may start by contacting your lender and requesting a personal loan term extension. With an extension, your lender would take your remaining balance and break it down into additional monthly installments. Loan details like your funded amount and the interest rate would most likely stay the same. 

Personal Loan Refinance

Another way to extend personal loan terms is to refinance the funding completely. Refinancing a loan involves receiving an entirely new loan plan, which includes new interest rates and payback terms. Refinancing may also come with other perks like lower monthly payments and additional funding. 

Personal Loan Rollover

Borrowers who fail to pay back their loan may be put into a loan rollover program by their lender. A loan rollover takes a borrower’s existing loan amount and rolls it over into a new agreement with updated repayment terms and rates. Borrowers do not usually receive additional funding with a loan rollover since they usually only happen when borrowers show signs of struggling to keep up with their loan payments. 

How To Pay off a Long-Term Personal Loan Faster

Check out the tips below for paying off long-term personal loans even faster. 

Make Higher Payments

Paying more than your amount due each month can help you not only save money on interest payments but pay off your loan early as well. When you pay more than the minimum amount due on your personal loan, you are reducing your balance quicker than scheduled. This means there is less funding to charge interest on, resulting in lower charges! 

Make Extra Payments

You may also make additional payments on personal loans to deplete the balance even faster. Before you start making extra payments, confirm that your lender does not charge prepayment penalties. A prepayment penalty is a fee some lenders charge to borrowers who make their loan payments before the designated due date. 

Get a Debt Consolidation Loan if Necessary

If you have several personal loans from multiple lenders, it may be wise to get a debt consolidation loan. These loans can be used to consolidate credit card debt, student loan debt, and any other expenses hanging over your head. 

However, make sure you borrow money the smart way by researching lenders and financial products before you sign any kind of loan agreement. 

What Is the Best Term Length for a Personal Loan? – Experian
Everything You Need to Know About Long-Term Personal Loans – Forbes Advisor

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