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When is a Long Term Personal Loan Right for Me?

If you’re thinking about taking out a personal loan and know that you’ll need an extended time to pay it back, or are requesting a large amount, then a long-term loan might be the best choice for you.

What is a long-term personal loan?

A long-term personal loan is usually defined as a loan that is between 5 to 7 years long. Long-term personal loans generally allow higher borrowing amounts and they may have lower interest rates than regular loans as they will take into account the extended loan period.

Long-term personal loans are usually secured loans, meaning your home or another asset is used as collateral in case you can’t continue to pay the loan. You can find long-term loans that offer either fixed or variable interest rate options. Fixed rate loans mean consistent repayment amounts, but variable loans give you the flexibility to pay back more when you are able to.

Why take out a long-term loan?

Due to the higher loan amounts, long-term personal loans are suitable for a variety of reasons including:

  • Weddings
  • A car
  • Ongoing education costs
  • Renovations to existing homes
  • Long holidays

Pros and cons of long-term loans

Like any loan, a long-term loan has both positive and negative aspects. One positive aspect is, because the monthly repayments are smaller, long-term loans are suitable for people who can’t afford to make large monthly payments. Due to the extended term, the minimum monthly payment will always be lower than a standard loan.

One of the drawbacks of long-term loans is that, over the term of the loan, you will pay more in interest overall than you would have with a shorter term. Also, paying the loan off early can attract fees. However, in certain situations, it is sometimes still worth considering.

When choosing a loan provider, you should still do your research and look for one with lower fees. Whichever loan you choose, you always need to consider your personal financial situation and what will be right for you. Some things to consider include:

  • What monthly payment can you afford?
  • How long do you want to commit to a loan?
  • How much do you want to borrow?

All of these aspects are things that you need to take into account before committing to a long-term loan.

Disclaimer: Please be aware that Cigno Loans’ articles do not replace advice from an accountant or financial advisor. All information provided is intended to be used as a guide only, as it does not take into account your personal financial situation or needs. If you require assistance, it is recommended that you consult a licensed financial or tax advisor.

NOTIFICATION OF MISCONDUCT BY CIGNO AUSTRALIA

Ordered by the Federal Court of Australia

The Federal Court of Australia has found that Cigno Australia Pty Ltd (Cigno Australia) and BSF Solutions Pty Ltd (BSF Solutions) have breached the law by engaging in unlicensed credit activity and charging prohibited fees.

In the period from July 2022 to 3 October 2023, over 100,000 consumers have been lent a total of $34 million, and charged fees of over $70 million, under the ‘No Upfront Charge Loan Model’ operated by BSF Solutions and Cigno Australia. At no time has either BSF Solutions or Cigno Australia held an Australian Credit Licence.

The Court also found that Mark Swanepoel (director of Cigno Australia) and Brenton James Harrison (director of BSF Solutions) were involved in these breaches of the law.

With effect from 24 May 2024, the Court has granted permanent injunctions preventing Cigno Australia and BSF Solutions from:

  • demanding, receiving or accepting fees or charges, including amounts of loan principal, from consumers in relation to credit provided under the ‘No Upfront Charge Model’; and
  • engaging in further credit activity pursuant to the ‘No Upfront Charge Loan Model’, including by entering into new agreements with consumers, for so long as they do not hold an Australian Credit Licence.

Cigno Australia was ordered by the Court to, by 5th July 2024, send written communications to consumers who between July 2022 and December 2022 entered into agreements with Cigno Australia and BSF Solutions under the ‘No Upfront Charge Loan Model’.

The Court will later determine whether (among other things) Cigno Australia and Mark Swanepoel ought to pay a pecuniary penalty in respect of this conduct, and whether Mark Swanepoel should be restrained from carrying on a business engaging in credit activity.

Cigno Australia, BSF Solutions, Mr Swanepoel and Mr Harrison intend to appeal the decision of the Court and have filed an application for leave to appeal. If the appeal is successful, some or all of the orders of the Federal Court of Australia may be set aside.

Where can you get more information?

Where to go for further support

You can access legal advice in your state at: Free legal advice – Moneysmart.gov.au.

If you are experiencing trouble with debt, or money worries in general, contact:

  • the National Debt Helpline on 1800 007 007 or online chat (9:30am to 4.30pm, Monday to Friday).

If you need someone to talk to, contact:

  • Lifeline on 13 11 14 (24 hours) or their crisis support online chat or
  • Beyond Blue on 1300 22 46 36 (24 hours) or their webchat