Should I choose a longer or shorter loan term?

The math on term choice (example: $15,000 at 12% APR): 2-year term: $707/month, $1,968 total interest. 3-year term: $498/month, $2,928 total interest. 4-year term: $395/month, $3,960 total interest. 5-year term: $333/month, $4,980 total interest. 7-year term: $267/month, $7,436 total interest. Each additional year of term costs roughly $1,000 in extra interest at 12% on a $15,000 loan. The tradeoff is real and significant.

When to choose a shorter term: Your income is stable and the higher monthly payment fits your budget. You are disciplined about extra payments (which you can also make on a longer-term loan). You want to be debt-free quickly and the total interest savings matter to you.

When a longer term is appropriate: The higher monthly payment of a shorter term would consume too high a percentage of your monthly income (aim for debt payments under 35% of gross income). Your income is variable and you want payment flexibility. You plan to make extra payments opportunistically but need the lower minimum as a safety net.

Hybrid strategy: Take a longer term (lower required monthly payment) and make extra principal payments voluntarily. This gives you the safety net of the lower minimum payment while letting you pay off as aggressively as your cash flow allows. Make sure your loan has no prepayment penalty before adopting this strategy.