Definition of Term Loan



A term loan is a loan that is borrowed for a period and it has a repayment schedule. The repayment installments bear both interest and principal amounts. The amount of interest will be depending on the number of installments, the amount paid as a down payment, and the overall length of time of the loan.

 


The term loans can be of three types. Short-term loans that corporations can obtain for financing short-term financing needs. Then comes the medium-term loans that are used by companies to finance any equipment, like the construction of a factory takes time and the repayment is made on a monthly or quarterly plan. The long-term loans are up to 25 years and are normally obtained by companies or individuals to finance real estate in installments.


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