Long-Term vs Short-Term Loans: Which Saves You More Money in Malaysia?
Should you take a 12-month or 60-month loan? The answer isn't as simple as "shorter is always better." While a 12-month loan saves you thousands in interest, the monthly payment might crush your budget. This data-driven guide reveals the TRUE cost difference between loan terms, helping you make the mathematically correct decision for YOUR financial situation.
⚡ Quick Answer (If You're in a Hurry)
You want to pay the LEAST total cost
→ Choose SHORTEST term you can afford
✓ Save RM 3,000-10,000+ on a RM 30,000 loan
⚠ Higher monthly payment
You need LOW monthly payment for cash flow
→ Choose LONGER term (but pay extra when possible)
✓ Monthly payment 40-60% lower
⚠ Pay RM 5,000-15,000 more total interest
You're unsure about future income
→ Choose MEDIUM term (36 months)
✓ Balanced monthly payment + moderate interest
⚠ Flexibility to pay extra without penalty
💰 Real Cost Comparison: RM 30,000 Loan
Same loan amount, same interest rate (10% p.a.), different terms
This table shows EXACTLY what you'll pay:
12 Months
RM 2,638
Monthly Payment
RM 1,656
Total Interest (5.5%)
✓ Pros:
- Lowest total cost
- Debt-free in 1 year
- Build credit fast
- Less interest vulnerability
✗ Cons:
- Very high monthly payment (need RM 8,000+ income)
- Tight monthly budget
- Risk of default if emergency
Best For:
High earners (RM 8,000+), strong financial discipline, no other debts
24 Months⭐ Recommended
RM 1,383
Monthly Payment
RM 3,192
Total Interest (10.6%)
✓ Pros:
- Manageable monthly payment
- Debt-free in 2 years
- Still competitive interest cost
- Good balance of cost vs affordability
✗ Cons:
- Pay RM 1,536 more interest than 12-month
- Medium-term commitment
Best For:
Most borrowers - sweet spot between affordability and cost
36 Months
RM 968
Monthly Payment
RM 4,848
Total Interest (16.2%)
✓ Pros:
- Comfortable monthly payment
- Budget flexibility
- Can handle other expenses
- Lower default risk
✗ Cons:
- Pay RM 3,192 more interest than 12-month
- Longer commitment
- Interest rate risk if variable
Best For:
Moderate income (RM 3,500-5,000), other financial commitments, need flexibility
48 Months
RM 759
Monthly Payment
RM 6,432
Total Interest (21.4%)
✓ Pros:
- Very low monthly payment
- Maximum budget flexibility
- Lowest default risk
✗ Cons:
- Pay RM 4,776 more interest than 12-month
- Long commitment (4 years)
- More total interest than shorter terms
Best For:
Lower income (RM 2,500-3,500), multiple financial obligations, prioritize cash flow
60 Months
RM 637
Monthly Payment
RM 8,220
Total Interest (27.4%)
✓ Pros:
- Minimum monthly payment
- Maximum affordability
- Easy to manage
✗ Cons:
- Pay RM 6,564 MORE interest than 12-month (73% more!)
- Very long commitment (5 years)
- Paying more in interest than many earn in a month
Best For:
Only if absolutely necessary for budget - consider smaller loan amount instead
Key Insight:
The RM 2,001 difference in monthly payment between 12 and 60 months costs you RM 6,564 in extra interest over time. Is the lower monthly payment worth RM 6,564 to you?
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