Choosing a Loan Term

Choosing the right loan term has a big impact on your monthly payments and how much you pay in interest over time. Many lenders now offer customized terms for mortgages — including community banks and credit unions and online lenders.


The term of a loan is the length of time it takes to pay off the debt, such as 60 months for an auto loan or 30 years for a mortgage. But loan terms can also include other conditions and fees.

What Is a Loan Term?

A loan term is one of the many facets that make up a mortgage loan. It’s important to understand the different terms and conditions associated with your loan so that you can be better equipped to negotiate with lenders for the best possible deal.

There are different types of loan terms, ranging from short to long, and they can affect many aspects of your repayment plan, including your monthly payments and the total amount you will be required to pay back. For example, a short-term loan will usually have lower interest costs but also has higher monthly payments than a longer-term loan.

For business owners, loan terms can play a big role in how fast you can grow your company. A short-term loan might provide the cash you need to hire more employees or invest in new equipment, while an intermediate-term loan could help you finance the time it takes for a new employee to be fully trained and bring in revenue.

The length of your loan term can be determined by the lender you choose, as well as your credit score and debt-to-income ratio. The longer the loan term, the more you will have to pay in interest charges because the principal will be increasing over time. However, if you opt for a shorter loan term, you will be able to liquidate the loan faster and save money in the long run.

Loan Term Definition

Loan terms refer to the specific conditions you and a lender agree upon when borrowing money. This can include things like the length of the repayment period, interest rate, penalty fees borrowers might be charged and other specifics that impact how much you’ll pay in total over the life of your loan. It’s important to review loan terms carefully before you finalize any borrowing agreement.

A loan term defines the duration of your debt, and is often based on the amount of time it takes to fully eliminate your principal balance when you’re making regular payments. The longer your loan term, the more you’ll end up paying in interest charges over the course of its lifespan.

The length of your loan’s term can be defined by a variety of factors, including the amount of money you borrow and the type of collateral you use to secure it. For example, an auto loan may be a six-year term, while a mortgage can last 30 years.

Some lenders might also use the term loan term to describe a specific set of conditions that apply to their own lending programs. This could include special eligibility requirements, required credit score or other factors that can help you qualify for a particular loan product. This can be a helpful way for lenders to distinguish their own loan terms from others in the market and make it easier for borrowers to compare different products.

Choosing the Right Loan Term for Your Budget

When deciding on a loan term, it’s important to consider your budget and financial goals. For example, a longer loan term may allow you to spread out your payments and make them more manageable on a monthly basis, but it will also cost you more in interest over the long-term.

Another factor to consider is the amount of other debt you have and your income. Ideally, you want to balance your monthly payments with other financial obligations so that you don’t overburden yourself.

The type of loan you’re getting and its purpose will also impact your loan term. For example, mortgage loans typically have longer terms than personal or car loans.

Finally, you’ll want to compare the interest rates and other fees that come with each loan option. A higher annual percentage rate (APR) will usually mean a longer loan term, while lower APRs often indicate shorter terms.

The final step is to negotiate with lenders to get the best deal possible on your loan term. Be sure to ask questions and be ready to walk away if you’re not happy with the terms offered. With a little effort, you can find the right loan term for your budget and finances. Good luck!

Loan Term Calculator

Loan calculators give borrowers the ability to see how loan payments may fit into their budget. They typically take in variables such as loan amount, payment frequency, compounding and loan term. This allows borrowers to play with different scenarios and determine the best options for them.

The loan term is the number of months or years that it will take to repay the loan. It has a significant impact on how much you pay each month and over the life of the loan. Longer terms will result in more interest being accrued over time, which can significantly increase the total cost for borrowers. Conversely, shorter terms will lower monthly payments but also result in higher overall borrowing costs for borrowers.

When choosing a loan term, you will need to consider the size of your budget and how comfortable you are with the risk of debt. If your monthly payments are too high to allow you to meet other obligations, you might want to shorten the term of the loan and make smaller routine payments.

The loan calculators below will let you calculate your total monthly payments and provide an amortization schedule for each payment, which is a breakdown of the portion paid toward principal and the portion that is interest. They will display the loan term and if applicable, fees.