How to Pick the Right Personal Loan Term Length – 2024 Guide

A personal loan can help you get fast funding. It can be taken advantage of for almost any purpose you have in mind. Personal loans have monthly repayment terms with which you have to comply, though. However, the term length will often be up to you.

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How To Properly Choose a Loan Term Length


A personal loan term length is the amount of time you have to repay the total loan cost. Personal loans can come with term lengths that range from 1 to 5 years. Sometimes, it might be even longer than that range.

The shorter your loan term length, the lower the total loan cost will be. Short-term loans may carry higher monthly payments than long-term loans. However, it is alright as long as you find it financially manageable.

On the other hand, long-term loans have higher total loan costs because interest rates will continue to accrue in the long run. On the positive side, it carries lower monthly payments.

The personal loan term length will significantly affect your monthly loan repayments and the total interest rates you will pay over time. If you want to get over your loan quickly, a short-term loan is recommended. Furthermore, if you want to take your time in paying back the loan, a longer loan term would be a good option.

Other Factors to Consider in Applying for a Personal Loan


Besides the personal loan term length, the following should also be kept in mind:

  • Interest Rates

Personal loan interest rates are typically presented as an annual percentage rate (APR). This includes the fees and other costs that are added to the interest. A higher APR means a higher total loan cost. Hence, it is beneficial to choose a personal loan with the lowest interest rate you can find.

Interest rates vary from one lender to another. Furthermore, lenders typically post their interest rates online. This means it would be easier for you to shop around.

  • Fees

Besides interest, lenders most likely charge fees when it comes to personal loans. The fees will either be deducted from what was handed out to you or added to the loan balance. Furthermore, the cost of these fees will be presented in the APR.

  • Funding Time

The approval process and the amount of time it takes for you to receive the funds depends on several factors. Online lenders such as Credit Ninja usually offer quick funding. Most of them deposit your loan amount on the same day they approve your loan application.

  • Extras

Some lenders offer discounts that can help lower the personal loan’s interest rate. Most of the time, lenders give you discounts by setting up automatic repayment or applying online. Other lenders also lessen your interest rates if your credit score improves or you consistently make on-time repayments.

Short-Term Personal Loans


A short-term personal loan is usually paid back over a year or less. This type of loan usually depends on the lenders and your creditworthiness. However, getting one usually works like this:

  • You submit a loan application online or in-person;
  • The lender will assess your application by doing a credit check and checking your documents;
  • Once you get approved, the lender will give you a loan offer (this includes the interest rate and term). Lenders usually respond to applications fast when it comes to short-term loans;
  • After agreeing to the loan offer, you will receive the funds. Most of the time, the lender will deposit the amount within 24 hours after your loan request approval.

Benefits of Short-Term Personal Loans

Below are the benefits short-term personal loans carry:

Fast Funding: Short-term personal loans can help you get quick access to the cash you need. If you suddenly have an unexpected expense, this type of loan can help you with that.

No Collateral Required: Most of the time, short-term personal loans don’t require you to pledge collateral. This means you can get the funds you need without risking any of your prized possessions.

No Long-Term Commitment: You don’t need to commit a couple of years to repay this type of loan. You can receive the amount you need, repay it in full, then move on with your life. It can be as fast as that.

Flexibility: Some lenders are willing to work with you to help you find a repayment plan that best suits you. However, it is essential to note that this is not typically the case for payday loans.

Drawbacks of Short-Term Personal Loans

The following are the drawbacks of short-term personal loans you should be aware of:

Higher Interest Rates: Some short-term personal loans carry higher interest rates. It will help if you research more on this to avoid future financial problems.

Costly Fees: Some short-term personal loans carry costly fees for late payments. This can eventually increase your total loan cost, which means you’ll need to pay more.

Long-Term Personal Loans


Finding the type of loan that best suits you can be challenging at times. Long-term loans are excellent if you want a smaller monthly payment for the funds you want to borrow.

There is no official definition of what people consider “long-term.” However, in general, personal loan repayment terms ranging from 5 to 7 years are considered long-term. Furthermore, loan terms that are longer than seven years can be hard to find.

Benefits of Long-Term Personal Loans

Below are the benefits of long-term personal loans:

Lower Monthly Payments: This type of loan allows you to have lower monthly payments than short-term personal loans.

Availability: There are more and more lenders who offer long-term personal loans.

Drawbacks of Long-Term Personal Loans

Below are the drawbacks long-term personal loans have:

Will Pay More in Interest: Since you have more monthly payments, this means you’ll have to pay more in interest as well in the long run.

You Will Be in Debt Longer: Although paying smaller amounts each month is quite an advantage, this also means you will be in debt longer.


In selecting the right personal loan term length, keeping your loan repaying capacity in mind is essential. You can either choose a shorter loan term to fully repay the loan faster. Or, you can pick out a longer loan term to have a lower monthly payment.