What Personal Loan Term Length Should You Choose?

personal loan term length

When you need to make home repairs, pay an unexpected bill or consolidate debt, a personal loan can provide the money you need. Personal loans allow you to decide how to spend what you have borrowed.

However, personal loans come with various rates and terms that impact your costs and monthly payments. So, when you need to borrow money, what personal loan term length should you choose? 

Before diving in to loan term lengths, MoneyLion offers a service to help you find personal loan offers. Based on the information you provide, you can get matched with offers for up to $50,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you.

Personal loan term lengths (short-term and long-term)

Lenders typically extend personal loans from a few months to several years. Personal loan lengths can be broken out between short-term and long-term. 


Personal loans with terms ranging from a few months to three years are usually considered short-term. Interest rates can range from 6.99% to 35.99% depending on your credit score, the loan length, and the lender. Keep in mind that these rates can fluctuate based on other considerations. 

A short-term personal loan may be a good fit if you need to borrow a smaller amount of cash and can pay it back quickly. You might consider taking out a short-term personal loan to pay for an emergency car repair, moving expenses, a family vacation, or consolidating debt.


  • Typically lower interest rates
  • Pay off debt faster compared to long-term
  • Typically little to no restrictions on the use of money


  • Generally a higher monthly payment
  • May be charged loan origination or other fees
  • Potentially less flexibility


Longer-term personal loans typically span from three to seven years. Like short-term loans, the interest rates can fluctuate, but you could expect a range from 5.99% to 35.99% based on the lender, length of time, and credit score.

A long-term personal loan may be better when you need to borrow more money to pay for home repairs or you have a sizable debt to consolidate. A longer-term loan often works when you need a more affordable monthly payment. 


  • Usually lower monthly payments compared to short-term
  • Larger loan amounts are generally available for longer-term loans
  • Typically more flexibility compared to short-term loans


  • Typically higher interest rates compared to short-term
  • The payment schedules result in more time to pay off the loan
  • May be charged more in loan origination or other fees compared to short-term 

Factors to consider when choosing a personal loan term length

The length and terms of a personal loan heavily impact its cost and your monthly payment. Consider the following when selecting the right personal loan term length for your financial situation. 

Consider your financial goals and needs

Make sure the money you borrow fits into your financial goals and needs. After all, you need to pay back what you have borrowed. Consolidating debt or making a major repair to your car may fit firmly into your financial goals and needs. However, you might determine that an extravagant vacation does not. 

Before taking out a personal loan, be sure you can pay it back according to its terms. Your credit score can take a serious hit if you fall behind or default. So, if you plan to buy a house or make a big financial purchase in the future, a drop in your credit score can be costly. 

Evaluate your current and future financial situation

A monthly budget can be a useful tool to evaluate your current financial situation. By scheduling out how much money you make and what you pay each month, you can determine how much of a monthly payment you can afford. 

You may be better suited for a personal loan with a longer term if your budget is tight. While you’ll typically pay more interest, your monthly payments will be more affordable. A shorter-term loan may be the better fit if a higher monthly payment doesn’t strain your finances. You get a lower rate and pay back your debt sooner. 

Compare interest rates and the total cost of the loan

You pay interest and fees when you borrow money. The higher the interest rate, the more expensive your personal loan becomes. So, if you are trying to keep costs down, pay close attention to the different rates for short-term and long-term loans.

Some lenders charge origination and administrative fees to process your personal loan. To better understand the personal loan’s cost, compare the annual percentage rate (APR) for short-term and long-term options. When borrowing money, the APR represents your yearly cost (interest and fees). 

Compare loan offers from different lenders

To find the best personal loan for your financial situation, review and compare loan offers you get from various lenders. You may be able to prequalify with some lenders. So, you can see what rates and terms may be possible without dinging your credit. 

Pay close attention to the amount, loan length, interest rate, APR, and any lender terms, like prepayment penalties when comparing offers. 

How to get a personal loan

You can get a personal loan from an online lender, bank or credit union. Regardless of your lender, you must complete an application and submit requested documents, such as a W2 or paycheck stubs. Let’s take a closer look at the options available.

Online lenders

Online lenders can be a quick and easy way to get a personal loan. Some online lenders have lower credit score requirements, and you can usually pre-qualify to see what loan rates and terms you may be eligible for.

You can apply for a personal loan from your home or office with an online lender. Depending on the lender, you might be asked for documents such as a driver’s license, paycheck stubs and bank statements.

Some online lenders approve applications on the same day, whereas others may take a day or two. You usually receive the funds within a few days after approval.  

MoneyLion offers a service to help you find personal loan offers based on the info you provide, you can get matched with offers for up to $50,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you. You can also use the loan funds to pay off other existing debts. MoneyLion is here to help. 


Check with your local bank to see how to apply for a personal loan. While some banks let you apply online, others may require visiting a local branch. You may be asked for documents that prove your identity, address, and income.

Banks may take several days to approve your personal loan and disburse funds. 

Credit unions

You might qualify for a personal loan from a credit union if you are a member. Like banks, some credit unions let you apply online. In contrast, others require you to complete an application at a local branch.

How fast your application is processed and accepted depends on the credit union. Some credit unions have same-day approval and disburse funds within a few days. 

Choose the Best Personal Loan Term to Meet Your Needs

A personal loan can take the stress out of your finances. Remember, you need to pay back what you borrow. You could easily be stressed again if you cannot afford the monthly payments. Carefully consider its length and terms before you take out a personal loan. 


Can I change the term length of my personal loan after I’ve already chosen it?

Changing the term length of your personal loan can be difficult after you have signed the agreement. However, if you are experiencing financial hardship, the lender may be willing to do a loan modification to extend the length of your loan and lower your monthly payment. 

How does my credit score impact the personal loan term length I should choose?

Your credit score can affect the terms of your personal loan. The lender may be unwilling to extend a longer-term personal loan if your credit score is low. 

Can I pay off a personal loan early if I choose a longer term length?

You can pay your personal loan off early if your lender doesn’t prohibit it. However, you could be penalized for paying off your loan early. 

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