How Long Should Your Personal Loan Term Be?

Are you in need of some money? Whether you're looking for small personal loans or large ones, a personal loan might be exactly what you need to get an extra boost. Personal loans can help you pay for a necessary medical expense, make a repair on your home or pay for a wedding. Whatever your reason for needing the money, a personal loan could be a good fit, so long as you have a plan in place to pay it back.

Current Personal Loan Rates

As with any loan, you will pay interest on your personal loan. Your terms, loan amount and credit score will all affect what interest rate you will qualify for. The lower the rate, the less you'll pay in interest and overall for the loan.

LendingClub, a peer-to-peer lending site, offers some of the most competitive personal loan rates in the industry. Starting as low as 5.99%, LendingClub offers borrowers loans up to $40,000 and charges fewer fees than most banks. It might take longer to be approved, though, so make sure to plan accordingly.

How Long Should Your Personal Loan Term Be?

Long Term Personal Loans Versus Short Term Personal Loans

There are two types of personal loans-secured and unsecured. Secured personal loans are backed by collateral, such as your home, your car, artwork or jewelry. Unsecured personal loans are not backed by collateral and therefore come with a higher interest rate. Both secured and unsecured loans can offer shorter terms, meaning you pay back the loan faster than you would a long term personal loan.

Short term personal loans have higher monthly payments than long term personal loans, depending on the amount of loan you are taking out. If you only need to borrow a small amount of money, a short term loan could be your best bet as long as you can afford the monthly payment.

Which Personal Loan Term Is Best For You?

It's always in your best interest to pay off debt as quickly as possible. That being said, you don't want to wind up in more debt because your personal loan monthly payment is just too big for you to take on. The key is to find a happy-medium. Choose a personal loan term that works with your schedule while also allowing you to pay it off in as short amount of time as possible.

Personal loan terms usually vary from 12 months up to 84 months, depending on your lender. Make sure to compare interest rates with the length of the term in order to get the best deal. Whichever lender you decide to go with, you can try to negotiate the lowest interest rate possible.

As a reminder, don't forget to read the fine print in regards to paying the loan off early (some lenders will charge a prepayment penalty), what happens if you make a late payment and more. As always, a personal loan should be a last resort. Look at all of your options, including zero-percent interest credit cards, borrowing from a family member and old-fashioned saving, before agreeing to a personal loan.

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