Long-Term Personal Loans: A Smart Way to Finance Your Dreams

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Are you looking for easy ways to finance your dream of launching your own business? Do you require a hassle-free financing option to pursue higher education? A long-term personal loan can fulfil your big dreams, giving you the flexibility to repay on your terms. Never be limited by the urgency to pay larger EMIs; you can decrease your monthly loan commitment with a long-term loan.

In this blog, let us decode the intricacies of personal long-term loans and why they are better than short-term loans.

Long-Term Personal Loan Features

A long-term personal loan is an unsecured loan that enables you to finance your costly pursuits with a payment tenure varying from 3 to 5 years. Some lenders may even extend the loan term more. Some of the features that make long-term loans desirable are:

  • Higher loan amount
  • Lower interest rate
  • Lower monthly EMIs
  • Inclusive eligibility criteria

Are Personal Long-Term Loans Better Than Short-Term Loans?

With the introduction of fintech innovation, the personal loan market is soaring in India. In the last quarter of 2023-24, the NBFCs (Non-Banking Finance Companies) have disbursed Rs. 64,788.27 crores of personal loans, surpassing every other type of loan like gold loans, auto loans, education loans, healthcare financing, etc. As you explore the unsecured loan category, you have a crucial decision – a long-term or short-term loan. Unlike a long-term loan, a short-term loan has a shorter repayment period of 1 year or even less. So, which is the right strategy?

Before opting for a loan, understand your needs. Short-term loans are beneficial when you need quick cash for some regular expenses. However, when you require a substantial amount to organise a wedding, pursue technical education, or cash flow for your business, a long-term loan is better as you can get a higher loan amount. 

Interest rate is determined based on your eligibility for long-term or short-term loans. Long-term loans tend to have a lower interest rate than short-term loans, but the overall interest you pay towards the loan is higher for long-term loans. You can bring down the interest rate if you choose to offer collateral. 

Long-term loans are more affordable than short-term loans because of the lower EMI. Your monthly EMI will be lower because the loan repayment period extends for several years. If you receive a big bonus during the loan tenure, you can bring down the debt further with partial pre-payment. Ensure that your lender offers such flexibility. Sometimes, you may be charged a penalty for loan pre-payment. However, consider closing the loan much earlier if the penalty is lower than the overall interest. 

Regardless of your loan type, you can improve your credit score only with prompt payments. Analyse your budget and determine your loan affordability before you choose a lender. 

When Not to Choose a Long-Term Personal Loan?

To make smart financial decisions, knowing what you should not do is more important than knowing what to do. Understanding the common mistakes that borrowers make will help you choose the right loan for your needs. 

  • Don’t go for a long-term loan if your credit score is lower. Long-term loan interest rates are computed based on multiple eligibility factors, of which your credit score is a crucial consideration. With a lower credit score, lenders will increase your interest rate. 
  • Don’t choose a long-term loan if the EMI is not affordable in the long run. Understand your spending plan thoroughly and plan your budget. The long-term loan requires monthly payments for 3 to 5 years based on your payment tenure. 
  • Opt for a secured loan if you have those options available. For example, choose a home loan, education loan, or vehicle loan to spend money on those specific purposes. You can get lower interest rates with collateral than an unsecured long-term loan. 
  • Never borrow more than you require. You may qualify for a higher amount if you have a good credit score. However, always borrow only what you need because reducing your debt is the smart thing to do. 


Life always throws a curveball when you least expect it. Long-term personal loans can be your saviour when you need a helping hand. Online digital lenders are more inclusive than traditional banks as they use multiple parameters for borrower risk assessment. Even if you are not salaried, the NBFCs will offer long-term loans at a lower interest rate if your finances are relatively stable. Use a loan comparison website to compare multiple lenders and make smart investment decisions, knowing your needs. 


Is a long-term personal loan better than a short-term loan?

Each individual has unique financial needs. Generally, long-term loans have lower EMIs than short-term loans, but the overall interest you pay towards the loan is higher. So, choose a tenure that suits your requirements.

What is the tenure for a long-term personal loan?

Long-term loans are offered for a period of 3 to 4 years by most lenders. However, you can also find digital lenders that offer a loan tenure of 7 years. Explore your options to find a tenure best suited to your needs.

Can I get a long-term loan with bad credit?

Digital lenders use multiple parameters to evaluate loan eligibility. So, even with bad credit, you may qualify for long-term loans depending on your lender.


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