What Happens When You Extend Your Loan Term?

Quick Answer

Extending your loan’s term gives you more time to pay off the debt and may lower your monthly payment. But it will also likely lead to paying more interest overall.

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Extending your loan's term might give you more time to pay off a debt or lower your monthly payment. But it's not always an option, and extending the term can also lead to paying more interest over the life of the loan. Read on to understand the impacts, possibilities and alternatives that can be helpful when you're managing a loan.

The Impact of Extending Your Loan Term

The impact of extending your loan's term will depend on the type of extension. But, generally, a loan extension could:

  • Move skipped payments to the end of your term: You may be able to skip a few payments (with prior lender approval) and move them to the end of your loan's term. When you do this, your monthly payments might not change.
  • Decrease your monthly payment: If you can extend the term without skipping payments, your monthly payment might decrease because you'll repay the same amount over a longer period.
  • Increase how much interest you pay: Because interest may continue to accrue when you skip payments and during the extension period, you could pay more interest overall.

There are also two common ways to change your loan's term, and the option you use could determine the effects.

  • Request hardship assistance from your lender. Lenders might extend your loan's term if you request help and qualify based on a financial hardship, such as a lost job or medical emergency. But they aren't required to offer assistance, and the options could depend on your situation. Federal student loans are an exception because you can change repayment plans whenever you want—including to an extended repayment plan.
  • Refinance your loan. Alternatively, you may be able to extend your repayment term by refinancing a loan. Technically, you aren't changing your current loan's term, but you are taking out a new loan to pay off your current debts, and the new loan could have a longer term.

Temporary measures from lenders, such as offers to skip a payment, may be referred to as an extension, deferral or loan relief. Or, they may be billed as loan forbearance with some types of loans, such as mortgages and home equity loans.

When lenders offer to permanently change your loan's terms, that may be called loan modification. Modifications can include loan extensions and other changes, such as a lower interest rate, that make paying off the loan easier.

When to Consider Extending Your Loan Term

You generally can't extend your loan's term whenever you want or on your own. You'll need to qualify for a new loan if you're trying to refinance, and lenders have qualification requirements for their hardship assistance programs.

Also, extending your loan's term could lead to paying more interest overall and won't always be a good idea. But you might want to try to extend your loan's term if:

  • Your financial situation suddenly changes. Perhaps you or your partner lose a job, you need to pay for unexpected medical bills or you were affected by a natural disaster. These sorts of setbacks can make it difficult to afford all your expenses, and lenders may offer you assistance.
  • You want to free up money in your monthly budget. Refinancing with a longer-term loan can lower your monthly payment, giving you more money to spend on other wants and needs.
  • You can refinance with a lower interest rate. You may be able to extend your loan's term and lower your monthly payment without increasing your overall payment amount if you can refinance with a lower-rate loan.

Your refinancing options can depend on your credit and the type of loan you're paying off. For example, you may need to qualify for a new mortgage or auto loan if you want to refinance those loans. But there are also personal loans, which you can use for almost anything, including paying off existing personal loans, credit cards and other types of debt.

Find the best personal loans with Experian.

Alternatives to Extending Your Loan Term

You can explore other ways to free up money if your lender won't offer assistance and you can't qualify for a large enough loan to refinance the debt.

  • Go bare-bones on your budget. Try to find ways to save money and cut back on every unnecessary expense until you get your finances back in shape.
  • Find a quick side hustle. Look for side hustles that you can use to increase your income. Some in-person and online options don't require a lot of training, and you might be able to quickly sign up and get started.
  • Try to find financial assistance. Various government and nonprofit financial assistance programs might be able to help you lower or cover some of your bills. You can call the 211 hotline to get help identifying options in your area.
  • Open a new loan or credit line. You could try to get an emergency loan or a new credit card to help cover expenses. Some credit cards have intro 0% APR offers and don't accrue interest during an initial promotional period.
  • Borrow from family or a friend. Asking friends and family for financial help isn't always easy, but it could be a good and relatively inexpensive option. But consider the potential impact on your relationship if you aren't able to repay the loan.

Check Your Credit and Loan Offers

Whether you're trying to refinance a loan or qualify for a new credit account, your credit history and scores can impact your eligibility and offers. Check your Experian credit report and FICO® Score to see where you're at and get notified of important changes in your credit. You can also use Experian CreditMatch™ to get matched with credit card and personal loan offers based on your credit profile.