Definition
A loan term is the length of time a borrower has to repay a loan in full. Loan terms vary by loan type: mortgages typically have 15 or 30-year terms, auto loans commonly range from 36 to 72 months, and personal loans usually range from 12 to 60 months. Shorter terms mean higher monthly payments but less total interest paid. Longer terms mean lower monthly payments but more total interest paid over the life of the loan.
Formula
For monthly payments, multiply the loan term in years by 12 to get the total number of payments.
Example
Mortgage Term Comparison
On a $300,000 mortgage at 6% interest, a 30-year term results in a $1,799 monthly payment with $347,515 in total interest. A 15-year term requires a $2,532 monthly payment but only $155,687 in total interest—saving nearly $192,000 in interest, though requiring $733 more per month.