Upon further review, it seems that duration of loan payment period should be taken into consideration.

Using the compound interest calculator at

http://mustachecalc.com I have input 3 scenarios:

1) $40k loan @ 5.41% w/ 10 year pay period = $51,878.82 total amount paid. (11,878.82/40,000 = 29.7% premium paid for the loan)

2) $40k loan @ 5.41% w/ 5 year pay period = $45,743.16 total amount paid. (5,743.16/40,000 = 14.4% premium paid for the loan)

3) $40k loan @ 5.41% w. 1 year pay period = $41,181.83 total amount paid. (1,181.83/40,000 = 3% premium paid for the loan)

As you shorten the time period it takes you to pay off the loan, you (significantly) reduce the total amount you pay for the loan and the premium you pay for the privilege of borrowing the money. With this in mind, isn't it prudent to take into account duration of time paying back the loan? A 9 year difference in such a period, as illustrated above, significantly reduces the % premium one would pay.

(If I am interpreting these numbers wrong or how these loans work, please feel free to call me out. I completely agree with the basic idea that getting a 5.41% return by not taking out the loan is favorable to a possible higher return through investments....but the numbers above make it seem like far less of a ROI savings if the pay period is shorter).