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What is a long-term loan?
What are the types of long-term loans?
How does a long-term unsecured personal loan work?
Are there long-term unsecured loans for bad credit?
Are interest rates higher for longer-term loans?
Who can get a long-term unsecured loan?
What are the advantages of an unsecured long-term loan?
What are the disadvantages of an unsecured long-term loan?
How to get an unsecured personal long-term loan
How to choose the best unsecured long-term loan for me
Long-Term Unsecured Loans FAQs
Long-term loans allow you to borrow larger sums of money that you can repay over an extended period of time.
You’ll have to pay the money you borrow in monthly instalments with added interest. Long-term loans tend to have lower interest rates than short-term loans. However, as you will be paying the interest back for a longer period, it’s possible you could end up paying more in interest overall with a longer term loan.
There are several types of long-term loans:
Secured: Long-term secured loans require you to put down a physical asset, such as a house or car, as collateral for the loan. If you are unable to repay the loan, the lender keeps your asset or sells it to recoup their loss. Secured loans tend to offer cheaper interest rates than other types of loans because there is less risk that the lender will lose money if you can’t make repayments.
Unsecured: Long-term unsecured loans allow you to borrow money without putting down an asset as collateral. Lenders tend to have higher credit score requirements for unsecured loans because there is a greater risk that they’ll lose money if you can’t repay what you borrow.
Guarantor: Long-term guarantor loans require you to have someone who agrees to repay the loan if you can’t. This person is called a guarantor. Using a guarantor can help increase your chances of getting approved for a loan if you have a low credit score.
Mortgage: A mortgage is a type of loan that you can use to buy a home and is a form of secured lending. A typical mortgage is paid over decades (often around 25 years) in monthly instalments, with added interest. If you don’t keep up with repayments, the lender can seize your home and sell it to recover the money.
Car finance: You can use a car finance loan to spread the cost of buying a vehicle. There are different types of car finance available including hire purchase agreements.
You can use a long-term unsecured loan to cover large expenses, for example, refitting your kitchen. Or to cover unexpected bills, such as a boiler breakdown or replacing your car.
The amount of money you can borrow for an unsecured long-term loan varies between lenders. Your credit score, as well as your affordability in repaying the loan, will also be factored into how much you can borrow. Typically, customers with higher credit scores are more likely to be approved for larger loans. That’s because a high credit score indicates that you have a good track record with borrowing and keeping up with repayments.
It may still be possible to get a long-term unsecured loan if you have bad credit or no credit history at all, but it will be harder and you will have much less options.
You are likely to incur higher interest charges if you do manage to find a lender willing to offer you a product. Make sure you can afford the repayments and do not apply for loans unless you are confident you will be accepted. Using an eligibility service is a good idea.
Interest rates for longer-term loans can vary, but tend to be lower than interest rates on shorter-term loans because you’re borrowing money for an extended period of time. However, by borrowing over a longer-term you could end up paying more in interest overall when compared to a short term loan. Interest rates may also be lower for borrowers with better credit scores.
The eligibility criteria for long-term unsecured loans can vary but most lenders require that you:
Unsecured long-term loans can offer borrowers several advantages, including:
Lower interest rates: Lenders tend to charge lower interest rates for long-term loans because you’re borrowing more money over an extended period of time.
Larger loan amounts: You can borrow a larger lump sum using a long-term loan which can help you finance large costs, such as buying a car or paying for home improvements.
Flexible repayments: Some lenders let you pay off your long-term unsecured loan early without incurring early repayment charges.
There are several disadvantages to consider before taking out an unsecured long-term loan, such as:
Long repayment period: Keeping up with repayments for a long period of time may be tricky, especially if you have an unexpected change in employment that affects your income. By extending the term of the loan, it's likely the loan will cost you more in the long term, than a shorter term loan.
Extra fees: Some lenders charge fees if you repay your loan early, so read the terms carefully before applying to make sure you have the flexibility to clear your debt sooner.
Most providers let you apply for a long-term loan online. You’ll need to provide the following details:
The amount of time it takes for your application to be approved varies between lenders. Some loan providers make a decision within a day, while others may take a couple of weeks.
It’s important to shop around and read the terms of different loans to find the best unsecured long-term loan deal for you. Our comparison table above shows the features and interest rates for unsecured loan-term loans to help you choose.
You can use our loan breakdown to compare each long-term borrowing offer and decide which one could help you finance your next big purchase.
Once you find an offer that seems right for your finances, click through to the provider. It's important to always read the terms and conditions before applying for a loan.
Which is better – a long-term loan or short-term loan?
The better loan will be whichever one is more suited to your own situation. For example, whether you need a short-term loan or a long-term loan could depend on how much you need to borrow. Short-term loans are designed for people who need to borrow a smaller amount of money for a short period of time. For example, if you needed £1000 to pay for a new boiler, but wanted the debt cleared in a year.
Longer-term loans are designed for people who need to borrow larger sums of money for big purchases, which could take several years to pay back – for example, if you needed £10,000 to buy a new car or refit your kitchen and bathroom.
Can I get a long-term business loan?
Yes, it is possible to get a long-term business loan, which is similar to a long-term personal loan. Businesses can borrow large sums of money and make repayments over several years.
Is five years a long-term loan?
A loan of five years would typically be considered a longer-term loan.
Do I have to be a homeowner to apply for a long-term unsecured loan?
You don’t have to be a homeowner to apply for a long-term unsecured loan. Although the eligibility requirement for long-term loans can vary most lenders require that you:
Are overdrafts cheaper than long-term loans?
Long-term loans are usually cheaper than short-term forms of borrowing, such as overdrafts and credit cards, because you are borrowing money over an extended period of time. Each product is also designed for a very different purpose.
It’s important to remember that overdrafts and long-term loans are completely different products. Overdrafts are designed for short-term borrowing and the interest rates are usually much higher. This could mean that purchasing expensive items with an overdraft could cost you significantly more.
Long-term loans were designed to be used for at least a year. This means that the interest rates are likely to be lower, making repayments on big purchases more affordable.
Are short-term loans cheaper than long-term loans?
Short-term loans usually have higher interest rates than long-term loans. That’s because lenders need to recoup the cost of offering the loan and often charge more interest to do this.
Do unsecured long term loans pay out the same day?
Some lenders pay out unsecured long-term loans on the same day. However, this varies depending on the provider and some can take up to two weeks.
Is it better to reduce loan terms or monthly payments?
It depends on your financial circumstances. Using a loan repayment calculator can help you decide which option is better for you. It’s important to make sure that you can afford to repay whatever you decide to borrow. Extending the term will likely make your monthly repayments cheaper, but can increase the total cost of borrowing.
Is a long-term unsecured loan good?
A long-term unsecured loan can be a good option if you need to borrow a large amount of money for a big purchase and want to repay it over several years.
Could I be refused a long-term unsecured loan?
You may be turned down for a long-term unsecured loan if you don’t meet the eligibility requirements or have a poor credit score.
Can I repay my loan early?
Yes, some lenders let you pay off your loan early without incurring early repayment fees.
What if I struggle with long-term repayments?
It’s important to get help with your debt as soon as possible if you struggle with long-term loan repayments. Contacting your lender and explaining your circumstances could help them to make your repayments more affordable by reducing interest on your arrears and helping you make a payment plan.
How can I improve my credit score?
There are lots of ways to improve your credit score including registering to vote and paying off your debts on time.
Here are some examples from UK loan providers that you can compare using the Monevo eligibility service:
If you are thinking of consolidating existing borrowing you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
Our service is free of charge but we receive commissions from the providers we refer you to. This table is initially ordered by representative APR. You can use the options above the table to order it according to various criteria. You may be offered different rates depending on your personal credit rating.
Our comparison service features a selection of providers from whom we receive commission.
*Eligibility Service:
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