Guest User 
Your Cred-O-Meter:
Credit: Loan Terms

The longer the term of a loan—the time it takes to pay off the loan—the greater the total interest you will pay. For example, consider a $2,000 loan with two different loan lengths:

Loan amount APR Length of loan Interest paid Total cost of loan
$2,000 10% 1 year $200 $2,200
$2,000 10% 2 years $400 $2,400

With the one-year loan, you would pay $200 in interest (in addition to the principal of the loan), for a total of $2,200 owed at the end of the year.

With the two-year loan, you would pay $400 in interest (in addition to the principal of the loan), for a total of $2,400 owed at the end of the second year.

So, in this example, taking a two-year loan instead of a one-year loan would double the interest you would pay.