What is a long term loan?

A long term loan is a type of personal loan. You borrow money from a lender and agree to pay it back in full over a longer term, say five or seven years. You pay interest on the monthly repayments. By choosing a longer term to pay back the money in full, you’ll likely be offered a lower interest rate. It will also mean your monthly repayments are lower each month. But you will pay more in interest over the full length of a long term loan compared to a short term loan.

At Asda Money, we help find the right loan for you from our panel of trusted UK lenders. Our lenders offer loans from £1,000 to £25,000 over one to seven years.

How much can I borrow?

At Asda Money, we work with a panel of carefully selected and trusted lenders, that could provide you with a personal loan that matches your borrowing needs across a term that works for you. The process works like this:

• Check your eligibility for a personal loan online with us. We run a soft credit check that doesn’t negatively impact your credit history.
• We search our lender panel and list a range of different offers that meet your requirements.
• With just one simple eligibility check, you’ll get offers from some wide range of lenders across the market.
• Compare and find the right loan for you.
• Proceed to your chosen lender and complete your credit agreement process.
• Once approved by the lender, the money will be paid directly into your bank account.
• You’ll then make fixed monthly payments to the lender over term of the loan.

See how much you could borrow with our personal loans calculator.

Before taking out a long term loan, it’s helpful to understand all the advantages and disadvantages.

Advantages:

• Lower interest rate: With a long term loan, you’ll likely be offered lower interest rates than with a shorter term loan. Although the exact interest rate you’re offered will also depend on your financial history as well as the length of the loan.
• Smaller repayments: Spreading out the repayments over a longer period means less to pay back each month.
• Boost your credit score: Taking out a long term loan and meeting the repayments every month shows responsible borrowing which will help maintain or even boost your credit score over time.

Disadvantages:

• There’s more to pay back: Despite a lower interest rate, a long term loan is likely to be more expensive over its full term. If you choose to pay back the loan over a longer period, you’ll end up paying more in interest.
• You’re in it for the long-term: Opting for a longer term loan over a shorter one means you’re committing yourself to meeting your monthly payments for a longer time. You may be able to afford it now, but will you if your circumstances change? Say if you lose your job? If you default on your payments it can damage your credit score.

Can I get a long term loan with bad credit?

You may have a poor credit rating due to money problems or issues with borrowing in the past. A poor credit score will likely make it more difficult to borrow through a personal loan, as lenders will view you as high-risk. You may still be able to get a long term loan with poor credit, but often there will be fewer lenders willing to lend to you. And those that are willing to lend will likely offer higher interest rates.

But if you can get a long term loan with bad credit, it can help boost your credit score over time. Meeting your repayments each month without defaulting shows responsible borrowing. In time, this can have a positive impact on your credit score.

Should I consider a long term loan for debt consolidation?

If you have existing debts, on credit cards and store cards for example, you may consider a debt consolidation loan. By taking out a new loan, you pay off your existing debts and take on the loan instead. It doesn’t mean your debt goes away, but it does help you group it into one easier to manage payment. If you get a lower interest rate on your long term loan, it may make it more affordable each month too. Use our debt consolidation loan calculator to see how this could look for you.

However, there are risks to consider. Don’t be tempted to use your loan to pay for other things instead of your debt consolidation – this will simply lead to more debt. Applying for a new loan will also lower your credit score in the short term too.

*Please remember that by consolidating existing borrowing, you may be extending the term of the debt and increasing the total amount you repay.

Alternatives to a long term loan

Before taking out a long term loan, consider the potential alternatives, including:

Using a credit card: If you want to make a number of smaller payments rather than borrowing a lump sum, a credit card may be a better option. With an Asda Money Credit Card for example, you’ll earn rewards when you spend. Plus, if you pay it back in full each month you won’t pay any interest.

Borrowing from family or friends: It might not be the most comfortable of conversations, but it’s worth exploring whether you can borrow the money you need from a loved one. You won’t need to apply with a lender and submit financial details, and there’s no need for a credit check. They might not charge you interest either. Just make sure you’re all in agreement from the outset on the full amount you’re borrowing, the length of the loan, and the cost of the monthly payments. Drawing up a loan agreement can help with this.

Saving up: Yes, it means you won’t get the money immediately and you might have to delay whatever payment you need to make, but saving up ensures you won’t go into any debt. It’s also more cost-effective as there’s no interest to pay.

We’re here to help

At Asda Money, we’re here to help you find the right loan for you from our panel of trusted UK lenders, with long term loans up to 7 years. We can also help you understand how to better manage your finances with our Financial Support.

Compare loans using our trusted panel of lenders today.