Signs You Should Opt For A Longer Refi Repayment Term

by Staff on June 2 2021

When you apply for refinancing, one of the decisions you’ll have to make is regarding the repayment term. You can choose a repayment term that’s either shorter or longer than your current term. Most lenders offer repayment terms of 5, 7, 10, 15, or 20 years. The best option for you will depend on your financial circumstances and your long term financial goal.

If these two signs apply to you, you should opt for a longer refi repayment term

#1. You’re Struggling To Meet Your Current Monthly Payments

If you’re struggling financially and cannot afford your current loan payments, lowering your monthly payments can make the payments more affordable. You can’t change the terms of your original loan but you can choose to extend your repayment term when you refinance. When you opt for a longer refi repayment term, your outstanding amount is spread over that many more months. This instantly lowers the amount you have to repay every month.

#2. You Don’t Have A Steady Job Or A Source Of Consistent Income

In addition to loan payments, there are several other expenses you incur every month. If you’re not earning sufficient income or your income is inconsistent, paying for necessities itself can be a struggle. The loan payments only add to your financial stress. Opting for a longer refi repayment term will lower your monthly payments, giving you some relief.

Understand The Pros And Cons Of Opting For A Longer Refi Repayment Term

While extending the repayment term can help you get out of a tight spot, there are some significant downsides to this option. Understanding the pros and cons of a longer refi repayment term can help you make a more informed decision.


Makes the monthly payments more affordable: This is one of the biggest benefits of extending your loan term. You are expected to make all loan payments in full by the deadline. Missed payments will attract a fine and also damage your credit score. Extending the repayment term and reducing the monthly payments lowers the risk of this happening. It also frees up cash that you can use towards building an emergency fund.


You pay much more over the term of the loan: The longer the term of your loan, the more interest that accrues. Depending on how much you’ve extended the term by, this could add up to a substantial amount.

You’ll take longer to clear your debt: A longer refi repayment term means you’ll take longer to be completely debt-free.

Final Thoughts

Opting for a longer refi repayment term can make the loan more expensive for you. It will also keep you in debt longer. However, it reduces the risk of you defaulting on your loan which is a compelling enough reason to choose this option. It helps to keep in mind that there are no limits to the number of times you can refinance. When your finances improve and you can afford to increase your monthly payments, you can refinance again with a shorter refi repayment term.

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