A term loan is a type of loan where you borrow a specific amount of money from a bank or financial institution and repay it over a fixed period in regular installments. It is often used for purposes like starting a new business, expanding operations, or purchasing large assets like equipment or property.
Term loans can be secured, where you offer collateral like property or machinery, or unsecured, where no collateral is required. The repayment period for a term loan can vary, ranging from a few months to several years, depending on the agreement with the lender. The interest rate may be fixed or variable based on market conditions.
Before applying for a term loan, it’s essential to have a clear plan for how the funds will be used and ensure you can manage the monthly repayments. A term loan can provide significant financial support, but responsible borrowing is key to avoiding financial strain.