Long Term Loans

Am I eligible for a long-term loan?

My Community Finance is a credit broker, not a lender, working with credit unions that provide fair, affordable loans.

Credit unions are not-for-profit organisations, where any profit made from lending is returned to its members through better interest rates or reinvested back into the credit union so it can improve its services and reach more people.

In order to get a long term loan from one of the credit unions we work with, you’ll need to meet the membership criteria.

Membership criteria can vary between credit unions; the unions we work with accept members from almost all fields of employment.

When you apply for a long term loan via our website, we’ll match you with the credit union that best suits your circumstances.

In addition to becoming a member, you’ll also need to meet the following eligibility criteria:

Be between the ages of 21 and 65
Be employed and earn £18,000 a year or more
Live in the UK (excluding Northern Ireland, the Channel Islands and the Isle of Man)

Your ability to get a long term loan from one of the credit unions we work with will also depend on your financial circumstances, such as your creditworthiness and affordability. The credit union will perform a credit check and an affordability check when you apply.

How long is a long-term loan?

Long term loans can vary between lenders, for example, long term secured loans can have loan terms of up to 40 years, however, long term unsecured loans typically range from 12 months to 10 years depending on the lender. A secured loan is money you borrow guaranteed against an asset that the lender will use to reduce the risk of lending to you. The asset is usually your home, which you risk losing if you cannot repay what you’ve borrowed.

Our partner credit unions offer unsecured long-term personal loans between £1,500 and £25,000 over 12 months to five years.

Is a long-term loan cheaper than a short-term loan?

The overall cost of a long-term loan from one of the credit unions we work with will depend on several factors, such as your interest rate, the amount you borrow, and your loan term (the length of time it takes you to repay the loan).

When you apply for a long term loan with one of our credit unions, you decide how much you want to borrow and how long for. You’ll receive a personalised interest rate based on the information you provide and your personal circumstances.

Generally, borrowing over a longer period will lower your monthly repayments but could raise the overall cost of your loan because you’ll pay interest over a longer time, so it’s important to work out what’s right for you and your financial circumstances.

You can use our loan calculator to get an idea of how much your monthly repayments could be and the overall cost of a long term personal loan.

When using the loan calculator, it’s important to remember that it uses a representative APR, which is an indication of how much interest a typical borrower will pay. How much your loan will cost may be higher or lower, depending on your personalised interest rate, which will be based on personal circumstances such as your credit history.

Do long-term loans have higher interest rates?

Whilst the length of your loan may not raise the interest rate, you can end up paying more interest with a longer-term loan, because you will pay interest for a longer period of time.

What are the pros and cons of long-term loans?

Taking out a long-term loan is a big financial decision; it’s important to weigh up the advantages and disadvantages before you commit to borrowing money for a long period of time. Here are some of the pros and cons of long term loans.

Pros:

Spreading repayments over a longer period will mean your monthly repayments will typically be lower.
Can be used to consolidate high-interest-bearing debts into one affordable monthly repayment, potentially saving you money on interest.
Help spread the cost of large purchases or major life events.
Keeping up with repayments on a long term loan can help boost your credit score and demonstrate to lenders that you’re a responsible borrower.

Cons:

Borrowing over a longer period of time can make the overall cost of your loan higher than borrowing over a shorter period because you are being charged interest over a longer period of time
It can be difficult to predict what your financial situation will be in the future, so the risk of you experiencing financial difficulties and not being able to repay your loan becomes greater the longer it takes you to repay
If your financial situation improves within the term of your loan, the money you spend on loan payments could have been used for other investments of saving opportunities

How do I apply for a long-term loan?

You can apply for a long term loan with one of our credit unions using our straightforward online form. Here’s a guide to the application process:

First you need to decide over what time period you want to pay your loan back. The credit unions we work with offer payback periods from 12-60 months.

You’ll then request a personalised quote. To provide you with this, we’ll perform a soft credit check which won’t affect your credit score, and only you’ll be able to see a record of it on your credit report.

If you pass the eligibility criteria set by our partner credit unions, we will let you know the APR you will be offered on your loan - your personalised quote is valid for 30 days.

We will then send you a loan agreement for you to review to ensure the loan is the right product for you. Once you have read and are happy with the terms of the loan you’ll sign your loan agreement.

To complete our final checks, we will then conduct a hard credit search on your credit report, which other lenders or any organisation with access to your report will be able to see.

The credit union will aim to make a final decision about your personal loan within two working days. If successful, you should receive your within approximately four working days of your application.

What can I use a long-term loan for?

A long-term loan could be used to finance home improvement projects or large purchases such as a car or furnishing a new home. You could also use a long term loan to spread the cost of events like weddings, funerals or a family holiday.

You may also be looking to consolidate any high-interest-bearing debts into one affordable monthly payment.

Can I pay back a long-term loan early?

With a long term loan from one of our partner credit unions, it’s possible to pay your loan back in full before the end of your loan term, however they may charge an additional fee for this. It’s therefore important to consider whether repaying your loan early will end up costing you more.

If you change your mind about borrowing, you can repay your loan fully without incurring any fees if you do this within 14 days of the day you received the loan agreement.

Can I get a long term loan with bad credit?

In the UK, there are three main credit reference agencies; Experian, Equifax and TransUnion. Each credit reference agency has its own method of scoring, and depending on your credit history, you’ll be in one of four categories: Excellent, Good, Fair, or Bad.

Our partner credit unions will only provide loans to those with “fair” credit or better. Here’s an idea of what the three major credit reporting agencies consider to be “fair” credit.

Experian - 721-880 (out of 999)
TransUnion - 566-603 (out of 710)
Equifax - 439-530 (out of 1000)

It’s a good idea to check your credit report and score regularly; there are a number of websites and apps, such as Experian, Clearscore and Credit Karma that allow you to do this for free.

If you’re looking for a long term loan but think you might be turned down because you have a bad credit score, it might be a good idea to take steps to improve your credit score before you apply. Here are some ways you could do this:

Make sure you pay all bills and credit repayments on time and in full
Ensure you’re on the electoral roll, even if you don’t plan on voting, because this helps to prove your fixed address
Avoid making more than two credit applications within a six-month period - too many applications for credit in a short period of time may suggest to lenders that you’re in financial difficulty
Check all the information on your credit report is correct and up-to-date if you spot a mistake, let the credit reference agency know ASAP
Refrain from withdrawing cash from credit cards; this can make lenders think you’re in financial trouble
Aim to keep your credit card utilisation below 25% of your credit limit. Borrowing more that 25% of your limit can put some lenders off because it suggests you may be in financial difficulty