When deciding your loan length, there are many considerations to make before deciding the best course. You need to balance the pros and cons of both short term loans and long term loans against your personal circumstances. Let’s take a look at what is involved.
What Is Loan Length?
A personal loan term length is the length of time you have to pay back the funds. You can source personal loans with term lengths anywhere from 1 to 60 months and sometimes longer. Longer term length means lower monthly payments, but higher interest costs in the long run. To keep the cost of the loan down, you should look for the shortest loan term you can get while still keeping monthly payments manageable.
Finding The Balance
So you decide you need to borrow some money. That is fair enough. We all need to every now and then. Let us also assume you know exactly how much you need to borrow. Great. But there is still one big decision to make. And that decision is over what period to pay back what you borrow. You need to get the balance right. And the balance involves factoring in how much you can afford each month in repayments. And secondly, how long you are prepared to have the debt hanging over you. Some do not worry about this, but for some it can be a vital factor.
Deciding Your Loan Length – Use A Calculator
The need to pay off a debt quickly can be dangerous. It is a feeling i have right now, but i have to be patient and understand that i cannot pay off my debts in the near future. I must work towards a more long-term goal. But the danger exists when the desire to pay off the debt results in choosing repayments that are too large. They stretch you financially and mean you struggle to cover your usual essentials and your common outgoings. You should always pay back only what you can comfortably budget for. And not just budget for, but comfortably. Life will throw you a few unexpected obstacles along the way, as it does for us all. So you need some wiggle room when deciding what to pay back each month.
Borrow Just What You Need
You should only borrow what you need, not what is potentially available to you. This loan is for a necessity, not for treats. And the less you borrow, the easier it will be to pay off. And thus the easier it will be to lower the loan length.
Deciding Your Loan Length – Sit Down And Write A List
You probably do not know what you spend each month. Most of us don’t. Some money comes in, and loads of chunks of money go out. And the cycle repeats infinitely. But how often do we check our bank statements? How often do we look at what we are paying for. not often enough for many of us. So sit down and list everything you pay for. Then you know how much you have left to make loan repayments each month. The great thing about doing this is you will probably notice savings you can make, which makes loan repayments easier. Or perhaps removes altogether the need for a loan.
The Quicker The Better
The longer your loan, the lower the monthly repayments are likely to be. Also, often longer loans will come with more attractive interest rates. This on the surface sounds great, but this does not mean the loan costs less. Quite the opposite in fact, as because you spread out repayments, you end up paying more in total. So the truth is you should always try and repay debt as quickly as possible. But only at a pace you can comfortably afford. It is all about finding that balance.
