Long-term loans
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What is a long-term loan?
A long-term loan is a loan that’s repaid over a period of years, rather than months. It’s a way to borrow a large sum of money and spread the cost of an expensive purchase, such as a new kitchen.
A long-term loan can be an unsecured personal loan (usually repaid over a period of up to 10 years) or a secured loan (usually repaid within up to 30 or sometimes 40 years).
While you can typically borrow more with a secured loan, you’ll need to use an asset, such as your home, as security. If you don’t pay back what you owe, the lender has a legal right to sell your property.
The loan deal you’re offered will depend on your financial situation and credit score.
How do long-term personal loans work?
Here’s how long-term loans work in four easy steps:
1. Work out how much you need to borrow
Lenders will typically offer up to £50,000 with an unsecured personal loan, although some may have lower limits than this.
If you want to borrow more, you may have to secure the loan against an asset, such as your home – in which case you could potentially borrow up to £150,000.
Our loan calculator can give you an idea of how much you might be able to borrow and what the loan could cost you overall.
2. Think carefully about the length of loan you need before applying
Work out what you can comfortably repay each month, don’t overstretch yourself and only borrow what you need.
It’s worth keeping the loan duration as low as you can. While longer-term loans might have lower interest rates and lower monthly repayments, you could end up paying much more in interest overall as you’ll be paying it for longer.
Use our eligibility checker to get an idea of what long-term loan rates might be available to you. Then, if you see a product that matches what you’re looking for, you can apply.
Try our eligibility checker3. Receive the money
If your application is successful, the loan amount will be paid as a lump sum directly into your nominated bank account.
4. Pay back the loan
You pay back the amount you borrowed, plus interest, in monthly instalments over the agreed length of the loan.
What can long-term personal loans be used for?
Most people tend to take out long-term personal loans to finance big projects or expensive purchases that may be tricky to pay off quickly.
These could include:
- Home improvements, such as an extension or renovation
- Financing a wedding
- Buying a car
- Debt consolidation.
Long-term loan advantages and disadvantages
Long-term loan benefits
Some advantages include:
- Flexibility – there are long-term personal loans ranging from £1,000 to £50,000 and secured homeowner loans from £10,000 to £150,000.
You’ll typically have between one and 10 years to pay back a personal loan and up to 30 or 40 years to pay back a secured homeowner loan, depending on the amount borrowed. - Generally lower interest rates and lower monthly repayments – this can be helpful if you need to keep your monthly outgoings as low as possible (but see the disadvantages below).
Here’s an example – for illustrative purposes only – for a £15,000 loan taken out at 7% APR and paid back over eight, nine and 10 years. It assumes there are no extra fees involved with the loan.
| Length of loan | Monthly repayment | Total interest paid |
|---|---|---|
| 8 years | £202.90 | £4,478.82 |
| 9 years | £185.96 | £5,084.18 |
| 10 years | £172.50 | £5,700.59 |
Long-term loan disadvantages
Some disadvantages of long-term loans include:
- Higher total interest charges – the longer you take to pay back a loan, the more interest you’ll pay in total.
- Early repayment charges – long-term lenders can charge you for repaying the loan early. Charges vary among lenders, so check before you take out a loan.
- Penalties if you don’t keep up with the repayments – if you fall behind with your loan repayments, you could face extra charges and risk damage to your credit score. If your loan is secured against an asset, such as your home, the lender could repossess it.
Can you get longer-term loans for bad credit?
It’s possible to get a long-term loan with bad credit, but your choice of deals may be limited. Interest rates for bad credit loans are usually higher and the lender might limit how much you can borrow.
You might want to consider a secured loan for bad credit. This involves offering a valuable asset such as your home as security, meaning lenders may be more willing to lend to you. But it comes with the risk of losing your home if you don’t keep up your repayments.
Can I get a long-term loan for debt consolidation?
A debt consolidation loan lets you pay off multiple debts from different lenders by combining them into one loan – hopefully with a lower interest rate.
However, there are some downsides to debt consolidation loans:
- Some providers will only offer long-term debt consolidation under secured arrangements, which involves using your home as collateral. This means you could lose your home if you don’t make the repayments.
- Taking out a long-term loan could extend the term of your original loan. In this case, you could pay more interest.
If you’re struggling with debt, talk to your lender about what options are available. You can also get free debt advice on the MoneyHelper website.
Do I need a guarantor for a long-term loan?
If you have a poor credit rating or no credit history at all, having a guarantor with a good credit history could improve your chances of getting a long-term loan.
A guarantor is someone – usually a family member or close friend – who’ll guarantee to take over the loan repayments if you’re unable to make them. It gives lenders an added assurance that the loan can be paid back.
Be aware that guarantor loans usually come with higher interest rates than standard personal loans.
Am I eligible for a long-term loan?
You can find out whether you’re likely to be offered a long-term loan by using our eligibility checker. It’s a soft search so it won’t affect your credit score in any way.
You can check your eligibility and compare loans with us for repayment periods of up to 10 years for a personal loan and up to 30 years for a homeowner loan.
You’ll also be able to see if the lender allows loan payment holidays or debt consolidation, and whether early repayment charges apply.
Compare the Market Limited acts as a credit broker, not a lender. To apply you must be a UK resident and aged 18 or over. Credit is subject to status and eligibility
Check eligibilityFrequently asked questions
What is an instalment loan?
An instalment loan is another name for a personal loan where repayments are spread evenly over the length of the loan. This is different to a credit card, where your payments can vary from month to month based on what you spend and how much you choose to pay back.
How can I increase my chances of getting a long-term loan?
One of the best ways to increase your chances of being accepted for a long-term loan is to improve your credit score.
A good credit score shows lenders that you’re a reliable borrower and good at paying back your debts. And that means your loan application is more likely to be approved.
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The Editorial Team - Compare the Market
Experts in personal finance, insurance and utilities
Compare the Market’s Editorial Team is made up of industry experts with decades of experience in personal finance, insurance and utilities. Each of our authors has an area of expertise, where they can share their extensive experience to help you get a better deal, by finding the right product and saving money.