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Understanding Personal Loan Terms and Affordability

Updated: Nov 8, 2021

Personal loans provide a convenient method to pay for expenses at lower interest rates than those charged by most credit card companies. Personal loans are repaid in regular monthly payments, but the length of time it takes to pay them off is usually up to the borrower.

The length of your loan impacts the number of your monthly payments and the amount of interest you pay throughout the loan.

Choosing a Personal Loan Term Length

The term length of a personal loan refers to the time you are given to fully pay back the loan. A longer term length translates into lower monthly payments but more significant interest charges throughout the loan's life.

When applying for a personal loan, the term duration isn't the only element to consider. You should also think about the following:

1. Approval Time

What's the time frame for your loan application to be approved? And what's the timeline for getting your money after it is approved?

Payouts from online lenders are renowned for being lightning-fast. Some lenders make payments the same day that the loan is granted. If you're working with a financial institution like a bank or credit union, the approval and distribution process will likely take a few days or even weeks.

2. Annual Percentage Rate (APR)

A higher APR indicates a higher cost of borrowing. You’ll want to browse around for the lowest interest rate available. The APR ranges of lenders are often disclosed on their websites, making it straightforward for potential clients to compare rates across various providers.

3. Loan Fees

When it comes to personal loans, lenders often charge fees on top of the interest. These fees can be added to your loan amount or subtracted from your payout. They will include these expenses in the APR.

4. Special Incentives

Check with your lender to see if there are any reductions or other options for you to lower your interest rate or fees. Some lenders may offer a discount if you apply for a loan online or set up automated payments on your account. In other circumstances, your interest rate may decrease if your credit score improves or if you make payments on time over a specific period.

Obtaining a Personal Loan

Online lenders, banks, and credit unions all provide personal loans, but there are some critical distinctions.

1. Online Lenders

Some lenders specialize in providing loans to people with less-than-perfect credit. As opposed to credit unions and banks, they don't have physical branches you may visit, which keeps their overhead costs relatively lower. If you're worried about borrowing money online, engaging with a reputable lender might put your mind at rest.

2. Banks

It's best to start with your bank if you already have a strong connection with them. Bank loans often have higher interest rates and tighter credit criteria than credit unions or online lenders. If interacting with your lender in person, paying by check, or making loan payments in person are vital to you, a bank is the best option.

3. Credit Unions

Credit unions often charge cheaper interest rates and have fewer restrictions for borrowing compared to banks. All you need to do is join, then you can reap the benefits.


The term length of a personal loan may influence how much interest you pay during the life of the loan. When comparing personal loans, term duration isn't the only thing to consider. The lender you pick, your debt-to-income ratio, and your credit score may all have a significant influence on the cost of your loan.

There are a variety of reasons why you may need a personal loan in Gadsden, AL. We at Gadsden Finance know how critical it is to get aid quickly when you're short on cash. We make the borrowing procedure as easy and fast as possible to help you get out of a tight spot. In-person or over the phone, our team is here for you seven days a week. Call us today!

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