When applying for a personal loan, borrowers typically look at how much their monthly payment will be to make their decision. A longer loan term will result in lower monthly payments since there is more time to pay off the balance.

Is a longer loan term a good financial decision? Let’s look at the pros and cons of extending the repayment period for a personal loan.

Lower Monthly Payments

Opting for a longer loan term means the lender will split the balance into a higher number of monthly payments. As a result, your minimum monthly payments will be lower compared to a shorter term.

It will take more time to pay off your balance, but lower monthly payments have some advantages. With the average American carrying over $90,000 in debt, most people have other monthly obligations.

Keeping up with your monthly personal loan payments will be easier. You won’t have to worry about falling behind on your other obligations, such as mortgage payments, car loans, student loans, or credit card debt. 

Ability to Borrow More

Another advantage of taking more time to repay your loan is that you might be able to borrow more. Instead of borrowing just enough to get through an emergency, you can borrow a little more and find yourself in a more stable financial situation.

If you choose a short repayment period, borrowing more can cause your minimum monthly payments to go up. However, if you stretch the loan over a lengthier repayment period, you will see a negligible increase in your monthly payments.

Plus, lenders will be more likely to approve a larger loan if you choose a longer repayment period. Lenders assess how likely you are to fall behind on your payments when deciding whether they want to approve your loan. A lengthier repayment period is safer because it’s easier to keep up with the lower monthly payments.

The Cost of Borrowing

You need to look at the cost of borrowing when applying for a personal loan. The monthly payments will affect your budget, but you also need to look at the total cost of borrowing.

When you borrow money, you repay more than you borrowed due to fees and interests. With a short-term loan, you’ll typically get a high APR since the lender needs to make a profit over a short period.

However, long-term loans can end up costing more. The APR might be lower, but interest will accumulate over several months and increase the total cost of borrowing.

It can be difficult to compare loans with different terms since the lower APR can seem like the best option. Use a loan repayment calculator to compare the total cost of borrowing between products.

Lenders can charge anywhere from 10 to 28% in interest for personal loans. It can pay to shop around to find a low APR or look for a lender who will lower your APR if you sign up for autopay.

Find a compromise between the duration of your loan and the APR to save on the cost of borrowing. Stretch the repayment period as much as possible while keeping the APR within a reasonable range.

Lower Risk of Missing a Payment

Missed loan payments can have disastrous consequences on your finances. Lenders can charge up to $39 in late fees, but catching up on late payments can be difficult. Fees can accumulate, and before you know it, your personal loan will turn into bad debt.

If you get too far behind on repaying a loan, the lender will likely send your account to collection. You will deal with additional fees charged by the collection agency.

Plus, the late fees and other expenses can put a strain on your budget and put you in a difficult financial situation.

A short-term loan is riskier because unforeseen events can make it difficult to keep up with the larger payments. It will be easier to avoid missed payments with a longer loan term since the monthly minimum will be lower. Plus, you’ll have more time to catch up on any missed payments before the maturity date of the loan.

Balance Your Monthly Budget

For most borrowers, personal loans are not a one-time financial decision. Over 90% of individuals who use payday loans apply for additional loans within the same year.

While a personal loan can be a good option for emergencies, repeat loans can put a strain on your finances since the cost of borrowing will add up. It can also be challenging to balance your monthly budget if you have payments from multiple loans.

If you opt for a longer loan term, it will be easier to balance your budget and set some cash aside to build an emergency fund. This fund will help you plan for a debt-free future instead of having to borrow more money the next time you run into an unplanned expense.

And because it’s easier to borrow large sums with a longer loan term, you’ll be able to get enough cash to cover all your immediate financial necessities instead of having to prioritize and finding yourself in need of a new loan in a few months.

No Penalties If Paid Early

Even though a few lenders charge prepayment penalties, most lenders will let you pay off your personal loan early without any additional fees.

Paying off a loan early will lower the cost of borrowing since interest will have less time to accumulate. It can also help you get out of debt and balance your finances sooner.

The great thing about choosing a personal loan is that you have the flexibility to pay off your balance early without having the pressure of making larger monthly payments if something comes up.

It’s a great option for those with income that can vary from one month to the next since you can adjust the amount of your loan payment based on how much you can afford to spend.

Build a Solid Credit History

Another benefit of taking more time to repay your personal loan is that you’ll get the opportunity to build a solid credit history. Strong credit history can improve your credit score and help you qualify for lower APRs in the future.

A longer loan term means you’ll make more monthly payments, which will build a more comprehensive credit history. The lower monthly payments will also make it easier to keep up with this financial obligation, and you won’t have to worry about missed payments that can make your credit score drop by as many as 180 points.

For those with bad credit, building a strong credit history should be a priority. With a short-term loan, the lender will close your account within a few months once you have paid off your balance, which limits the impact of these loans on your credit report.

However, a personal loan with a longer repayment term will show up on your credit report for a longer period and will contribute to increasing your available credit limit for several months before the lender closes this account.


Monthly payments are an important consideration when borrowing money, but there are other factors to consider. In many cases, choosing a longer loan term is a smart financial decision because it’s easier to keep up with the monthly payments and balance your budget. However, you need to consider the total cost of borrowing and shop around for an affordable APR.



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-ViviaFi is not a lender in all states. ViviaFi uses various credit reports, data sources, and application information as part of their underwriting. Not all applications are approved. Approval and loan terms vary based on applicant qualifications and by state. Decision may take longer if additional verification or documents are required.

†Applications approved before 1:30 p.m. CT Monday-Friday are generally funded same business day, subject to your bank's processing times. Applications approved other times are generally funded the next business day. Some applications may require additional verification. In such cases, if approved, funds will be disbursed by the following business day after the additional verifications are complete.