Term Loan
September 11, 2009 in Mortgages & Credit
A Term Loan is simply a Loan from a bank or other financial institution that
has a specified principal amount (unlike a credit card) and a set repayment schedule with a fixed maturity date, when the loan must be paid back in full. Term loans also generally have a variable or floating interest rate. The majority of term loans will mature within a 10 year time period. The term loan is one of the most common forms of loan.
Al though term loans are not exclusive to businesses, the word itself is more commonly associated with business loans. A business may take out a term loan to help in its startup, or to cover operating costs for the first few years of operations. These are often popular because it frees up funds straightaway, and can be paid off over several years, giving the business a chance to start turning a profit.
