How to Choose a Personal Loan Term Length

Loan repayment terms can range from short to long, offering flexibility to match borrowers’ financial needs. This allows for financial strategies tailored to each individual’s needs, optimizing interest expenses and monthly payments.

This guide will explore personal loan terms, from minimum to maximum lengths. See how to choose a term that aligns with your financial goals and budgetary needs.

How long is a personal loan term? 

Depending on the lender, personal loan terms can vary from 12 months to 15 years. This wide range caters to diverse financial needs and repayment abilities. It sets how long you’ll have to repay the loan, affecting your monthly payment and total interest costs. 

Lender	Repayment terms
LightStream	1 – 12 years
SoFi	2 – 7 years
Upgrade	2 – 7 years
Upstart	3 or 5 years
Best Egg	3 – 5 years
PenFed	Up to 5 years
Navy Federal	Up to 15 years
Discover	3 – 7 years
Avant	1 – 5 years

The term length often involves balancing borrower preference and lender options. Borrowers may have an ideal term to fit their budget. Lenders set their own term ranges based on the loan amount, the borrower’s creditworthiness, and their lending policies.

Because terms can vary from lender to lender, finding the term suitable for your specific financial situation and needs is essential. However, not all borrowers have the same degree of choice when selecting their loan term. 

Individuals with higher credit scores and stable financial histories often have access to a broader range of options, including shorter and longer terms. Options may be more limited for those with less favorable credit profiles because lenders consider them higher risk. 

As you can see in the table above, different lenders’ terms can see huge variances.

How long can you get a personal loan for? 

Depending on the lender, personal loan terms can span 12 to 180 months. This extended length offers the advantage of much lower monthly payments, making large sums more manageable over time. 

However, longer terms are not universal and depend on the lender’s policies and the borrower’s creditworthiness. Opting for a longer term affects the total cost of borrowing because you incur more accrued interest charges over time. 

While monthly payments become more affordable with a longer term, the borrower may pay more interest than a shorter term. This trade-off is crucial for borrowers when choosing their loan term length.

To illustrate the impact of loan term length on the cost of borrowing, let’s consider an example of a $10,000 loan with an annual interest rate of 6%. We’ll compare the total interest paid and the overall repayment amount across two different term lengths: four years and seven years.

	4-year term	7-year term
Loan amount	$10,000	$10,000
Interest rate	6%	6%
Monthly payment	$234.85	$146.09
Total interest paid	$1,272.81	$2,271.19
Total loan cost	$11,272.81	$12,271.19

This comparison demonstrates the financial implications of choosing a longer loan term. While extending the loan term reduces the monthly payment burden, it increases the total interest paid over the life of the loan. 

When deciding on the term length of a personal loan, it’s essential to weigh the lower monthly payments against the increased total cost of borrowing, ensuring the choice aligns with your financial goals and circumstances.

What is the shortest personal loan term you can get? 

While personal loan terms can extend to several years, borrowers can select much shorter durations. The shortest personal loan term available in the market often starts at 12 months. Opting for a brief term appeals to those wanting to repay their debt fast and lower their total costs.

Shorter personal loan repayment terms lead to higher monthly payments, but the total interest paid is reduced. This approach is beneficial for borrowers who have the financial flexibility to handle larger monthly outflows and wish to avoid prolonged debt obligations.

To compare, let’s consider a $10,000 loan with an annual interest rate of 6% and terms of 12 months and 60 months. The table below illustrates the total interest paid and the overall repayment amount for these terms:

Repayment term	12 months	60 months
Loan amount	$10,000	$10,000
Interest rate	6%	6%
Monthly payment	$860.66	$193.33
Total interest	$327.97	$1,599.68
Total loan cost	$10,327.97	$11,599.68

As shown, choosing a shorter loan term lowers the total interest expense compared to a longer term, reflecting the trade-off between monthly payment affordability and overall borrowing cost. 

This example further underscores the importance of aligning the loan term with one’s financial capacity and goals, ensuring a balance between manageable payments and minimizing the cost of borrowing.

How to choose the right personal loan term length for you 

Selecting the right personal loan term length hinges on balancing your monthly payment capability with the overall cost of borrowing. Considerations such as your monthly budget, income stability, financial goals, and the credit score impact play pivotal roles in this decision. 

Reflecting on these factors can help you choose a term that’s right for your personal situation:

• Evaluate your monthly budget: The loan’s monthly payment should fit within your budget without compromising your ability to meet other financial obligations. Opting for a longer term can reduce the monthly payment but will increase the overall personal loan cost.
• Consider your income stability: If you have a secure job or a steady income source, you might choose a shorter loan term, which can involve higher monthly payments but results in lower total interest. A longer term might offer the necessary payment flexibility if your income is variable.
• Think about your financial goals: If minimizing interest and paying off debt quickly aligns with your objectives, a shorter term might be preferable. If you’re prioritizing cash flow and maintaining liquidity, a longer term could be more beneficial, even if you’ll pay more interest over time.
• Reflect on the impact on your credit score: While making on-time payments can improve your credit, the amount of debt you’re carrying compared to your income (debt-to-income ratio) can also affect your score. Choose a term you can comfortably afford to repay without overleveraging yourself.

After considering these points, it’s crucial to simulate different scenarios. Tools such as loan calculators can help you see how differing term lengths affect your monthly payments and interest costs. This exercise can help you see the trade-offs between monthly affordability and total borrowing cost.

Selecting the ideal personal loan term is a personal decision based on your individual wants, needs, and circumstances. 

By considering your monthly budget, income stability, financial goals, and the potential effects on your credit health, you can choose a term that meets your immediate financial needs and supports your long-term financial well-being.

Recap of personal loan lender repayment terms

Lender	Repayment terms
LightStream	1 – 12 years
SoFi	2 – 7 years
Upgrade	2 – 7 years
Upstart	3 or 5 years
Best Egg	3 – 5 years
PenFed	Up to 5 years
Navy Federal	Up to 15 years
Discover	3 – 7 years
Avant	1 – 5 years