The former-Liverpool midfielder's previous deal was due to finish at the end of this campaign and clubs across Europe were alerted as he took his time over an extension.
He finally put pen to paper this week, however, on an agreement that will see him stay at the Bernabeu until 2016.
"It was just about starting the process of talking to the club. Having had the injuries I wanted to see how I was after that and what level I would be able to play at," Alonso told a news conference.
The Spain international missed a number of games at the start of the season with a groin injury followed by a broken bone in his foot.
"It was important for me to feel comfortable and the club helped me in that way," he said.
"When I was sure that this was the best place for my family and me to be, then we spoke and arranged everything.
"It was not a case of looking to be free at the end of the season. I signed in January but it could have been in October, November or even in June. I want to keep playing at the level of Real Madrid."
Alonso said he was unaware of interest from other clubs.
"There were no offers, I decided to stay here and that's it, maybe my agent knows of them," he said, while denying that he had been approached by Chelsea and his former coach at Real, Jose Mourinho.
"There was no offer. We (Alonso and Mourinho) have a good relationship but he never said anything about going to Chelsea.
"I am happy here and (Real coach, Carlo) Ancelotti is one of those who has pushed most for me to stay. He was a midfielder and knows what the role involves. His public support for me was also important in my decision to stay."
(Editing by Toby Davis)
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