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Tata Capital > Blog > Personal Use Loan > Pros And Cons Of Long-Term Personal Loans

Personal Use Loan

Pros And Cons Of Long-Term Personal Loans

Pros And Cons Of Long-Term Personal Loans

What is a personal loan?

Personal loans are unsecured loans that allow individuals to gain the funds they need without stressing about collateral. Most personal loans are collateral-free.

Although availing of a personal loan is easy for everyone, utilising the funds in the right way possible can help one achieve their financial goals. Still, with one wrong step, one can fall into financial debt with higher personal loan interest charges, and thus, it is advised to understand the pros and cons of a personal loan before availing of it.

What is a long-term personal loan?

When one avails of a personal loan, they are given various options regarding repayment. 

If one chooses to go for the long term, then the EMI's are on the lower side, and if one chooses to go for the shorter term, then the EMI's range on the higher end as the interest of the same is calculated accordingly. 

And hence, the duration of the long-term loan is on the higher end, and the amount of personal loan EMI cost per month is comparatively easy on the pocket. But personal loan in India is still not preferred among the masses. 

Let's first understand the pros and cons of personal loans to make a rational decision.

What are the pros of long-term personal loans?

There are multiple pros of personal loans one can consider:

1. Most loans are segregated into various housing, vehicles, and education sectors. These loans are available only for the services mentioned and not everything. At the same time, a personal loan is not constricted to a set purpose and thus can be availed for anything and any purpose.

2. Personal loans are mostly collateral-free wherein one doesn't have to submit any documents or assets to the bank to avail of the loan and can avail the same on a good credit score.

3. As most people avail long term personal loans, the monthly financial burden of EMI becomes much lesser and can be easily managed. It assists in financial planning and allows the person to use the free funds for other uses. In a personal loan, there is also an option of prepayment where one can easily pay the loan before time; via prepayment of the loan, one will be free from the upcoming interest rates if they pay their loan before time.

4. As personal loans are collateral-free and directly linked to the credit score of a person, timely repayment of the loan also benefits in levelling up the credit score and the possibility of availing higher loan amounts in the future without collateral. Thus, one can even improve their credit scores via their loan timely repayments.

What are the cons of long-term personal loans?

Everything has some positive aspects and some negative aspects linked to them. Personal loans, which are collateral-free and provide easy repayment options, also have setbacks, such as:

  1. The interest rates on non-payment of EMIs are on the higher end: If one fails to pay their EMIs on time, they are likely to fall into a financial debt trap, which is a difficult situation and affects their credit score. Personal loans are based on the credit score and thus will also impact the ability to avail of loans in the future. 
  2. Not everyone fits the eligibility criteria: One needs to have paid monthly credit card payments on time and a higher credit score to be eligible for a personal loan. Even then, if one has already exhausted their credit limit on loans, applying for a personal loan not only becomes difficult but also a far-fetched dream for such individuals. You can also use an online personal loan eligibility calculator to check for your personal loan eligibility.


Thus, before deciding to avail of a personal loan, one needs to ascertain if they can find other alternatives and if taking a loan is the essential option. One needs to be wise with how they spend the loan amount and the repayment. One needs to make sure to make all the payments on time and not to commit any defaults. If they are confident regarding the same, then a long-term personal loan can also come as a boon for many people worldwide.

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