Long Term Personal Loan

Pros and Cons of Long-Term Personal Loans

May 24, 2022 • 3316 views

A long-term personal loan can meet your financial needs without disturbing your finances. But is that reason enough to lock yourself into a long-term financial commitment?

A personal loan offers borrowers plenty of options whether it is for a planned home renovation or to cover a medical bill. Personal loans also offer freedom, as borrowers can choose their payment terms. They can repay the loan in a few months or choose a longer payment cycle. While a long-term payment schedule may seem like a viable option, there are definite drawbacks. Borrowers should analyze the pros and cons before converting their loan into a long-term commitment.

It's not required to specify a particular purpose to your lender while applying for a personal loan. Depending on the amount and tenure, personal loans are short-term personal loans and long-term personal loans. Both types are unsecured loans, and thus, they don't require any collateral. However, the latter offers you an attractive advantage of lower EMI. But before deciding on loan tenure, you should be aware of the advantages and disadvantages of a long-term personal loan.

Personal loans are known to be flexible. Individuals can apply for any loan amount as per their requirement as well as repay as per their convenience. The term of a personal loan ranges from 12 months to 60 months. The borrower can choose the term of any loan within the range.

What is A Long-Term Personal Loan?

Long-term personal loans allow the borrower to choose a loan term of 5 to 7 years. The EMI amount of the loan will be less than the short-term loan. There are many advantages to choosing a long-term personal loan but at the same time, the disadvantages should not be overlooked. Here is the list of advantages and disadvantages of long-term personal loans.

Advantages of Long-Term Personal Loan

  • Lower EMI rates

When you apply for a personal loan with a long tenure, the value of your EMIs decrease. Consequently, the burden on your monthly budget reduces, which helps you to repay your loan without hassles.

  • Builds credit score

Developing a good credit score needs a long period and punctuality. So, if you will pay your monthly EMIs without delay, it can help you improve your credit score.

  • Top-up loan eligibility

Top-up loans are loans which you can apply in addition to your existing personal loan. 

Disadvantages of Long-Term Personal Loan

Higher Interest

The quantum of interest is much higher in a long-term loan than in a short one. As a result, you may end up paying a much large amount than what you have borrowed. Because of these Long-term personal loans are heavier on the pocket overall, than short-term loans

More Debt-Ridden Years

A stretched-out tenure will keep you under financial stress for a longer period. You will need to plan how to manage and maintain your monthly budget to pay your EMI for a greater number of years as compared to a short-term personal loan.

Reduces Chances of Getting Another Loan During the Tenure

According to lenders, if you are already in debt, your capacity of repaying another loan decreases. This can make you less eligible for any new loan that you may need. Therefore, a longer tenure reduces your chances of availing of another loan until you clear your existing debt. A lender will evaluate your debt-to-income ratio before authorizing your loan application. Also, a long-term personal loan may have an impact on your credit limit and make you ineligible for further loans. Paying monthly EMIs for a longer duration is a tough task. Hence, before taking out a long-term personal loan it is always good to check and evaluate your current income, available funds, and repayment appetite.

More Stress

A longer personal loan tenure will put you under financial pressure for a longer time. You regularly need to plan and monitor your monthly spending to ensure timely EMI payments. It can be stressful and challenging.


The right choice for your loan repayment timeline will depend on your financial situation, including how much flexibility you have in your budget, how much monthly EMI you can afford, and what your money goals are. Before you decide whether you want a short-term loan or a long-term loan, carefully consider which will work best in your situation. Once you have your loan, you must stick to the terms unless you refinance to a new loan with a different repayment period.


We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Personal Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply

poonawalla fincorp team

Poonawalla Fincorp Team

Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.

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