Fixed Repayment Schedule
Term loans have a predetermined repayment schedule, usually consisting of monthly or quarterly installments. These payments include both principal and interest, allowing borrowers to gradually repay the borrowed amount over the loan term.
Fixed Interest Rate
Term loans often come with a fixed interest rate, which means the interest rate remains constant throughout the loan’s duration. This provides predictability for borrowers, as they can anticipate their total repayment amount.
Designated Loan Term
The term of a term loan can vary, but it is typically set at a specific number of months or years. Short-term loans may have a term of one to three years, while long-term loans can extend to a decade or more.
Use of Funds
Term loans can be used for various purposes, such as financing business expansion, purchasing equipment, funding real estate projects, or covering personal financial needs.
Collateral or Personal Guarantee
Depending on the lender’s requirements and the borrower’s creditworthiness, term loans may be secured with collateral (e.g., assets or property) or may require a personal guarantee from the borrower.
Term loans are a common financial instrument used by businesses and individuals to access capital for specific needs while spreading out the repayment over a defined period, making it easier to manage their financial obligations.
