Are Long Term Loans for Bad Credit a Good Idea?

Although it’s not always the case, many with people with bad credit also have problems with cash flow. This means that making regular high dollar payments on various loans might be difficult to do, and obviously this can make a bad credit score even worse. Taking out long term loans for bad credit is something that you might have considered doing because short-term loans generally come with higher, less affordable monthly payments. On the outside, a long-term loan seems like a better idea because the longer the loan is drawn out, the lower the payments can be. In spite of this benefit, it’s important to look at the big picture before taking out such a loan.

Disadvantages of Long Term Loans

If you need to take out a $5000 personal installment loan, your lender might let you decide how long you want to pay on it. On paper, your payments are going to be much higher every month if you opt for the shorter duration, and your payments will go down if you let the loan drag out for five or even six years. You may be tempted to take the long term option because the payments will be more manageable, but what you’re not thinking about is that the longer you’re paying this money back, the more money you’re giving up in interest. In fact, there’s a good chance that by the time you’ve paid the loan off in it’s entirety, you’ll have paid that $5000 you borrowed back two times over. Who wants to do that? It also won’t be any fun to know that you’re going to have that annoying monthly payment hanging over your head for the next five to six years. Even if your payment is very low, chances are excellent that you’re still going to get incredibly sick of trying to remember to pay it every single month for that long.

Advantages of Long Term Loans

In spite of the fact that you will almost definitely be giving up more in interest than you want to, getting a loan term loan could make it easier for you to make your payments for a while if you really do need the money. Making a $50 payment every month on a $4000 personal loan with bad credit will most definitely be much easier for you to manage than making a $200 payment every month. However, you shouldn’t lose sight of the fact that you’re paying a lot in interest. Once your financial situation improves, it might not be a bad idea to either start seriously paying down on the loan by putting something extra on the principal with each payment or talk to your lender about refinancing for a shorter duration of time.