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24 months vs 36 months vs 60 months —How Long Is Too Long?
Picking a loan amount is easy—you usually know what you need. Picking a loan term, however, is where borrowers can leave money on the table. Stretch the term and each repayment feels lighter, but you stay in debt (and pay interest) for longer. Shorten the term and you could clear the balance more quickly, yet the monthly bite can strain cash-flow.
Balancing comfort and cost isn’t just a personal trade-off—it must also fit within affordability and suitability guidelines. If higher repayments would overstretch your budget, the loan will need to be structured so that the payments remain genuinely manageable and appropriate for your circumstances.
This guide shows you—in dollars and cents—how the length you choose changes both your monthly budget today and your total interest bill tomorrow.
Why the term matters
When you apply for a personal loan, two key numbers shape your finances:
1. Your regular repayment – what actually leaves your account each month.
2. Your total interest cost – the “price tag” on borrowing.
Balancing these two figures is key to choosing a term that keeps you comfortable now and could save you money over time.
A quick look at the numbers
Example: $20,000 personal loan + $495 establishment fee (financed into the loan) at 12.95% p.a., repayments monthly.
|
Term |
# of months |
Monthly repayment |
Total interest paid¹ |
What it means for you |
|
12 months |
12 |
$1,830.08 |
$1,466 |
Clears the debt in a year and saves about $6 k in interest versus a 60-month term—but the monthly repayment is the highest. |
|
24 months |
24 |
$973.89 |
$2,878 |
Almost halves the 12-month payment while still saving $4.6 k compared with five years. Suits strong, steady cash-flow. |
|
36 months |
36 |
$690.06 |
$4,347 |
A middle ground loan term: interest bill $3.1 k lower than 60 months. |
|
48 months |
48 |
$549.32 |
$5,872 |
Extra breathing room (-$141 vs 36 months) but total interest paid is increasing— and only $1.6 k cheaper than 60 months. |
|
60 months |
60 |
$465.80 |
$7,453 |
Easiest on monthly cash-flow, yet you pay the most—interest paid is more than double what would be paid over a two-year term. Great if monthly flexibility trumps total cost. |
Key takeaway: Chasing the smallest repayment can cost you thousands more overall. Check out our Loan Repayment Calculator to run your numbers.
How to choose the right term
|
Ask yourself… |
Why it matters |
|
“What monthly figure feels genuinely comfortable?” |
Over-committing could lead to missed payments and credit-score damage. |
|
“What is genuinely affordable?” |
Affordability may prevent a 12- or 24-month option – lender will offer a term that they can evidence is comfortable for your budget. |
|
“How quickly do I want to be debt-free?” |
A shorter term feels like pulling off the band-aid—tough at first, but finished sooner, with potentially big interest savings. |
|
“Do I have an emergency buffer?” |
If your rainy-day fund is thin, the breathing room of 36–60 months may be worth the extra interest—at least initially. |
Bottom line
There’s no one-size-fits-all “perfect” term. What is perfect is knowing the trade-off: higher monthly repayments versus a higher total price tag—and recognising that affordability tests can also influence what’s actually available to you. Run the numbers, be honest about your cash-flow comfort.
Need help finding your sweet spot? better finance™️ advisers are only a click away. We’ll model scenarios based on your goals and help you choose a term that keeps both your budget and your peace of mind intact.
¹ Calculations are illustrative only and assume a fixed 12.95% p.a. rate with monthly repayments. Fees other than the $495 establishment fee (financed into the loan) are excluded. Your actual rate, fees, and repayment schedule may differ. Always read your loan agreement and seek personalised advice.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.
