Other Loans

Term Loan

A term loan is a type of loan where a lender provides a borrower with a fixed sum of money upfront. In return, the borrower agrees to repay the loan with interest over a specific period, typically through regular installments. Term loans are commonly used by businesses to finance long-term investments like purchasing equipment, expanding operations, or acquiring real estate. They offer a predictable repayment structure with either fixed or variable interest rates, making them a reliable source of funding for businesses with sound financial standing.

1. Basic Eligibility

Minimum 18 years, maximum age varies by lender (usually 60-65 years)

Indian Citizen

Regular source of income (salary, business income, etc.)

Good credit score (typically 750+)

May be required depending on the loan amount and lender’s policy

2. Benefits

Typically lower than other loans due to longer tenure.

Predictable payments, easier budgeting.

Funds large investments without immediate strain.

Can be used for various purposes (equipment, expansion, etc.).

Timely repayments positively impact creditworthiness.

Access funds rapidly to meet needs.

Streamlined application process.

3. Types Of Term Loan

Short-term loans (up to 18 months) are used for working capital and seasonal needs, such as business loans for inventory and payroll.

Intermediate-term loans (2-5 years) are used for expansion and equipment purchases, such as loans for machinery and vehicle purchases.

Long-term loans (3-30 years) are used for major investments and real
estate, such as home loans and commercial property loans.

4. Key Factors of a Term Loan

The margin money percentage for all types of Term loans typically ranges
from 10% to 25% of the loan amount.

Long-term interest rates are usually higher than short-term interest rates.

Collateral in a term loan is an asset (like property, vehicles, or investments)
pledged by the borrower to the lender as security for the loan. If the borrower defaults on
the loan, the lender can seize and sell the collateral to recover the outstanding debt.
Collateral often helps secure lower interest rates for borrowers.

The repayment period of a term loan, often referred to as the tenure,
typically ranges from 1 to 10 years, but can extend up to 30 years depending on the loan
type and lender’s policies. This period determines the duration over which the borrower
repays the loan in regular installments.