I'm looking to get a home equity loan to do debt consolidation. My credit union offers 5-year, 7-year, 15-year, and 30-year fixed rate loans that have no pre-payment penalties.

Now I know the longer loan term, the more interest you pay. However, since there's no pre-payment penalty I can make extra payments in addition to the required monthly payment in order to pay the loan off faster to avoid the interest cost. Therefore, it would seem to me that it would be better to get a long term loan so that the required monthly payments would be smaller just in case I face unforeseen hardship.

So my question is what are the advantages of getting a short term loan over the longer term one?


in b4 this ain't quora ...

If there’s no early break fees like in the old days go with longest loan term and get an offset/redraw facility attached if you have those in your country.

Longer term = lower rate and more flexibility for you. So long as you do as you say and pay it down as if you got a shorter term.

Advantage of short term is that if you can’t handle your money and constantly buy **** you don’t need/fund holidays with debt etc you will be forced to be disciplined or lose your asset + collateral.

If you are an adult and can pay it off ASAP with no penalties the longer term provides more freedom and flexibility in the event of job loss, sickness, additional children etc

Cheers