Borrowing 25,000 at 8% a year over 84 months instead of 36 cuts the monthly payment from 783.41 to 389.66, and raises the interest from 3,203 to 7,731.
The payment falls because the loan is repaid more slowly. That leaves more of it owed for longer, and interest is charged on whatever is still owed.
Five loan terms
The same loan and the same rate in every row:
| Term (months) | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 36 | 783.41 | 3,203 | 28,203 |
| 48 | 610.32 | 4,296 | 29,296 |
| 60 | 506.91 | 5,415 | 30,415 |
| 72 | 438.33 | 6,560 | 31,560 |
| 84 | 389.66 | 7,731 | 32,731 |
What the example leaves out
A lender may charge a different rate for a longer term. A car also loses value while the loan is repaid, and on a long loan the amount owed can be more than the car is worth for a time; how much depends on the car.