What is a term loan

A term loan is a type of loan offered by financial institutions that are usually availed by business to help them manage their cash flows. It can be categorized into two types, depending on the tenure of the loan, such as unsecured and secured ones. An unsecured loan does not require any collateral to be provided whereas a secured one does.

Term loans have a shorter repayment tenure of upto 8 years but can vary depending on the needs of the borrower.

These loans, offered by banks as well as financial institutions, are suited for various purposes based on the business requirement such as working capital for day to day activities, expansion related needs, buying inventory and more.

Types of term loans

Term loans are shelled out to suit the borrower funding needs based on various factors, such as:

These factors influence the term loan interest rates. There are three types of term loans, namely, short term loans, intermediate term loans, and long term loans.

Short term loans:

A short term loan is a type of loan offered to the borrower for a duration of 12 to 18 months. Some lenders also give a tenure of 84 months for short term loans. Business owners requiring immediate financial assistance avail short term loans to fulfill their needs and repay the loans in a short amount of time.

Intermediate term loans:

Intermediate term loans or midterm loans have a tenure longer than 84 months. These types of loans are useful for businesses with big-budget financial needs such as purchasing machinery, boosting working capital, etc.

Long term loans:

Long term loans have a tenure from anywhere between 3 years to 30 years. Available at attractive interest rates and easy EMI rates, long term loans come with a lump-sum funding, fulfilling all business requirements and are easy to repay over the long tenure.

Categories of Term Loans

Term loans can be classified into secured loans and unsecured loans.

Secured loan:  A secured loan or collateral loan is a type of loan that enables the borrower to use the asset or items that he/she has pledged as collateral for the lender. 

The borrower's assets include machine, car, real estate and other worthy items which are useful in day-to-day life.

Unsecured loan: Unsecured loans are those where loans are given with no collateral or security required from the borrower. Unsecured business loans usually involve minimal paperwork and offer quick approval.  

The interest rates charged by these lenders tend to be higher than rates charged for secured loans as there is risk involved in non-collateralised lending.

Features of term loan

The features of term loans are:

Advantages of term loan

Given below are some of the benefits of a term loan :

Disadvantages of term loans:

What is the eligibility criteria for term loans?

Banks or financial institutions lending term loans will only lend to applicants who fulfill the necessary criteria. The borrower 

Moreover, the applicant should not have any past defaults with any financial institution.

Who is eligible to apply for term loans?

Term loans are up-front financial solutions for businesses that extend for a long period of time. Term loan interest rates vary from bank to bank depending on the applicant’s profile, business requirements, purpose of the loan, etc. Several banks as well as financial institutions such as Money View offer term loans to all kinds of businesses with varying interest rates if you fulfill the eligibility criteria

You can avail a personal loan from Money View on our website or loan app easily for any kind of purposes mentioned above or for any other financial need of yours. Get in touch with us at loans@moneyview.in or 08045692002.

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