Do I need a long-term personal loan?

A long-term loan could be the right option for you in a wide range of situations. For example, it could be suitable if you know you have a significant cost to cover, such as a new car or a major landscaping project. If you can’t afford to pay off that sort of money in one go, a long-term loan can help you to spread the cost over time and break it down into more manageable payments.

We offer loans of £1,000 to £5,000 to be repaid over a maximum of three years (missed or late repayments will incur a £12 charge). But as with any financial decision, you need to make sure it’s right for you before you apply for a long-term loan.

If you’re considering applying for a credit card, then bear in mind a credit card as an alternative can offer you some flexibility in terms of payments. Credit cards usually have a minimum monthly payment requirement, but you should always try and pay more than this if you can. If you keep up with your repayments then effectively you have access to a continuous line of credit. However, it’s also important to remember if you just pay the minimum payments on a credit card, the balance does accrue further interest. Unlike a personal loan, whether it’s a long-term or short term loan, you are over your agreed period after which the agreement ceases.

Some credit card providers also offer rewards with their cards, these can come in the form of loyalty rewards and suchlike. Typically, personal loans tend not to have any incentives associated with them. This can vary from lender to lender though.

Long-term loans vs credit cards

To give you an idea of some of the key differences between long-term loans and credit cards, we’ve put together this summary:

Long-terms loans, credit cards and your credit history

Your credit file is what lenders will look to as a part of their credit check when assessing whether to offer you a loan or credit card. Using a credit reference agency, they can build a picture of what your credit history looks like. So if you’ve had multiple applications over a short period, had missed payments in the past or CCJs, all of this will be available as a part of a credit check.

Whatever your credit history is like will play a role in the decision if you’re eligible for either. A ‘bad credit history’ isn’t likely to make you more eligible for one over the other – a common misconception. Many think that a less than perfect credit history means you’re ineligible for a credit card. Some lenders, including 118 118 Money do consider applications from those with bad credit.

You can use our eligibility checker to see if you’re likely to be accepted for the 118 118 Money Simple Interest Rate Credit Card or not. You may be wondering why use this service; our eligibility checker can provide an indication of eligibility without completing a full credit check. If you’re searching for credit, as we said earlier, too many full applications over a short period of time can have a negative impact on your credit score. Our eligibility checker does not leave a footprint on your credit file. But remember, this is just an eligibility check, if you decide to apply thereafter, we will conduct a full credit check.

Is a long-term loan better than a credit card?

No, not necessarily. The purpose of the loan or credit card is more of an indicator of which can be better for your own circumstances. One type of credit may be more suitable to some and therefore ‘better’ than the other.

For example, you may want to improve your credit in which case a credit card designed to build credit may serve a better purpose than a long or short term loan. Alternatively, you may have a budget in mind for monthly repayments on large planned for borrowing such as home improvements or buying a car, in these instances a loan may be more suitable than a credit card.

You may be looking to potentially reduce your monthly payments by way of debt consolidation. If your debt is on a current card, then a balance transfer card may help you. Alternatively, there are debt consolidation loans you could consider instead. 

The features of each type of credit line can be vastly different. If the features of one are more suitable for your circumstances than the other, then this may be a better fit over the other. Make sure you always do your own research before making a decision.

Will an application affect my credit score?

Applying for any type of credit multiple times in a short period can negatively impact your score. So, it makes sense to do your research and choose your provider wisely. You can use our eligibility checker to see if you’ll be approved with us, and it’s a tool that won’t affect your credit rating.

If you are accepted for credit – whether that be for a long-term unsecured loan, a credit card or anything else – keeping up with the repayments can improve your score. It shows lenders that you are a reliable borrower, so it can work to your advantage. If you miss or are late with repayments, however, it could reflect negatively on your score.

Will you do a credit check when I apply?

Yes. All applications for credit cards or long-term loans in the UK are subject to a credit check. If you apply with us, we’ll carry out a check to help us make a decision on your application. Before you begin, you can always check your credit report; we recommend our free eligibility tool, which won’t affect your score.

What if I have questions?

If you’re weighing up whether to apply for a long-term loan or a credit card and have some questions on our products, we can help. Just get in touch with our Customer Services team or call us on 02920 548 118. Lines are open from:

8am – 7pm Monday to Saturday
9am – 5pm Bank holidays
Closed – Sundays

Alternatively you can use our web or app chat service.