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Loan Term
Definition
The loan term is the length of time you have to repay a loan in full, typically expressed in years or months.
Explanation
The loan term directly affects your monthly payment and total interest cost. Shorter terms have higher monthly payments but much less total interest. Longer terms have lower payments but more total interest.
Common mortgage terms are 15 and 30 years. Auto loans range from 3-7 years. Personal loans typically have 1-5 year terms.
Example
A $280,000 loan at 6.5%: 30-year term = $1,770/month. 15-year term = $2,440/month but saves over $180,000 in total interest.