On spotlight: Term loan.
Understanding term – the simpler way to get credit.
Definition of Term Loan?
Term loan defines a loan offered by a bank and carries specific amount with repayment criteria and with either fixed or floating interest rate.
A term loan is a loan from a bank for a specific amount that has a specified repayment schedule and either a fixed or floating interest rate.
- Term loan is suited for a small business establishment with sound financial statements.
- Down payment is required o reduce the payment amounts and the total cost of the loan.
- When you apply for term loan you will get personalised offer based on your affordability, and you can choose between the amount you want, the lowest monthly instalment or the lowest interest rate, starting at 12.9%.
Types of Term Loans:
Term loan comes in several categories, and these categories usually reflects the lifespan of the loan.
- Offered to institutions or forms and runs for less than a year. This loan is best suited for firms that don’t qualify for a line of credit.
- This category of loan runs for a period between one and three years and its supposed to be repaid in monthly installments from borrower’s cash flow.
- Long term loan as the name suggest will run for three to 25 years, and its comes with assets as collateral.
- Repayment of long term loan is usually on monthly or quarterly basis.
- Repayment is from profits or cash flow.
- The loan limits other financial commitments the company may take on, including other debts, dividends, or principals’ salaries and can require an amount of profit set aside for loan repayments.