Long Term Personal Loans

Need a little longer to repay? What you need to know about long term personal loans

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A long-term personal loan is a loan that has a loan term of between five to seven years. This is a considerably longer amount of time, so they’re often used for big purchases such as a car, boat, complicated surgery or a huge wedding.

Something to be careful of when it comes to long-term personal loans, is your repayments. Since you’re extending the loan for as long as you can, your ongoing repayments may be lower but you will be paying more interest overall. This can be good for your short-term finances as it will be easier on your cash flow, but you’ll be in debt for longer.

Compare long-term personal loan options

Name Product Interest Rate From Effective Interest Rate Minimum Loan Amount Maximum Loan Amount Loan Tenure
HSBC Personal Loan
3.7%
7%
S$5,000
S$200,000
Up to 7 years
Apply by 29 February 2020 and get a promotional interest rate from 3.7% p.a. (EIR 7% p.a. is only applicable to customers with annual income of at least $80,000, and tenor between 3-7 years) and receive S$108 cashback plus S$88 processing fee waiver. T&Cs apply.
Standard Chartered CashOne Personal Loan
3.88%
7.63%
S$1,000
Up to 4x fixed monthly salary, subject to a cap of S$250,000.
1 - 5 years
Receive up to S$1,088 cashback and S$160 Anniversary Cashback on your approved loan. Ends 31 March 2020.
Citibank Personal Loan
4.55%
8.5%
S$1,000
S$100,000
Up to 5 years
Receive cash starting at 4.55% p.a. (EIR 8.5% p.a.) on a 36-month loan tenure.

Compare up to 4 providers

How does a long-term personal loan work?

Most personal loans offer loan terms of between one and seven years, so a long-term personal loan has terms within the five- to seven-year mark. While these loans are usually taken out by people who are borrowing more, usually in upwards of S$30,000, they can also be taken out by people borrowing a lesser amount but unable to afford higher repayments.

Borrowers will have a choice between fixed and variable rates with their long-term personal loan. Fixed rate loans mean steady repayments, but variable rate loans give you more flexibility with your repayments, including being able to make additional repayments and pay back the loan early.

Which is better: long term or short term?

Ultimately, a shorter loan term is better. Your repayments may be higher with a short-term personal loan, but you will pay less interest overall. For example, a S$20,000 loan repaid over four years at a 12.5% p.a. rate will see you repaying S$532 each month and paying S$5,517 over the course of the loan term. If that term was extended to seven years you would be repaying S$358 per month, but the interest you pay would essentially double to S$10,108 over the loan term.

How to compare personal loans that have a longer loan term

  • What is the interest rate of the loan?
    This defines what your repayments will be over the course of the loan. It’s important that you take this into account by using a repayment calculator to determine whether you can make the repayments.
  • Is the loan secured or unsecured?
    Secured loans are ones that require you to provide some kind of collateral, and these tend to attract lower interest rates in comparison to unsecured loans. If you’re buying a car, the car can serve as collateral, or you can use an asset you already own, such as your car or equity in your home, as collateral for a loan.
  • What is the loan amount you’ll be borrowing?
    How much you can borrow depends on various factors like your purpose for the loan, your ability to provide suitable security, your annual earnings and your monthly expenditure.
  • Do you have multiple repayment options?
    Repayment flexibility comes in the form of you being able to choose between weekly, fortnightly, and monthly repayments. If you take a variable rate loan, look for one that allows you to make extra repayments without incurring any penalties, as this allows you to pay your loan off sooner. In such a scenario, you may also want to look for a loan that offers a redraw facility.
  • What are the other fees and charges on the loan?
    Loans often come with additional fees and charges. These fees vary from lender to lender, so it’s important to be clear before applying.
  • Do you have a range of loan terms available?
    Long-term personal loans range from 5-7 years.

Read more: Unsecured personal loan comparisons

The good and not-so-good

The good

  • Lower repayments. A loan with a longer term means lower repayments, giving you more cash flow throughout the loan term.
  • You could hack the loan. By choosing a longer loan term and making additional repayments you could pay your loan back sooner while taking advantage of the lower repayments.
  • You could use the finance for huge expenses. Long-term personal loans allow you to finance more expensive purchases such as cars or boats.

Not-so-good

  • You will pay more in interest. A longer loan term, as demonstrated in the example above, results in you paying more interest over the course of your loan term.
  • Keep you in debt longer. Having longer repayment period makes you pay off the entire loan longer.
  • Tendency to incur another debt. Since consolidating your debt can free you from bulk payments, you might be inclined to apply for another source of credit.

Things to avoid about long-term personal loans

  • Excessive debt. While taking out a long-term personal loan might seem like a good idea at the onset, but it can lead you a debt that might be difficult to repay, depending on your circumstances. Try to make a repayment plan ahead of time and account for unexpected expenses in your budget.
  • Fees and charges. Make sure you go through all the fine print and find out exactly what you have to pay in terms of fees and charges. These can come in the form of application fees, insurance costs, arrangement fees, early repayment fees, settlement charges, and late charges.
  • Tendency to splurge. Long-term personal loans normally set a minimum loanable amount so you expect to get a larger chunk. What does this entail? You can be tempted to use it all up and buy more than what you need.

Case study

Personal loan #1Personal loan #2
Interest rate12.99%12.99%
Loan amountS$40,000S$40,000
Loan term4 years7 years
Total interestS$11,499S$21,107
Difference+ S$9,608

How to apply for long-term personal loans

Applying for a long-term personal loan is rather straightforward, and you can start by comparing your options. Go through the options on this page and once you find a suitable product, click on it to go to the provider’s website. As part of the application process, most lenders who provide such loans require that you meet a few basic eligibility criteria, which usually include you being an Singapore resident and being over the age of 21.

As part of the application process, prepare to provide details about your employment and your earnings. If you’re taking a secured loan you’ll have to provide documents to prove ownership of the collateral in question.

What is next?
  • Short term loans
  • Medium term loan comparisons

Picture: Shutterstock

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