Term loan can be defined as a period or time-loan that is approved and disbursed either by a Bank or NBFC. A time-loan can be a short-term or long-term loan that must be paid back in regular installments, such as Equated monthly Installments (EMIs). Interest rates can be fixed or fluctuating.

The loan term can range from 12 to 60 months. Term loans are offered by banks and non-banking financial institutions as a range of products. These include Business Loan; Personal Loans; Home loans; Education loans, Gold loans and Automobile loans.

Categories and Types of Term Loans

• Term loans can be classified according to their time period.
  • Short Term loanA short-term loan is a loan that has been offered, approved and disbursed for a period ranging between 12-24 months by a lending organization.
  • Long-Term Loan
    Long term loans are defined as a loan that is offered, approved and disbursed for a period of 10 to 30 years by a lending organization.

• The following are the categories of term loans based on their security.
  • Secured Loans
    A secured loan is a term loan that requires collateral in the form of landed estates, residential or commercial properties, equipment, machinery or raw materials, stocks or other assets. As a general rule, secured loans are offered at low interest rates.
  • Unsecured Loans
    When a term loan is not secured by collateral, it can be classified as an unsecured one. These loans are considered high-risk and are therefore available at higher interest rates.

The purpose of a term loan can be classified further. If you are seeking funds for business purposes, or if a loan is needed, you can choose the following –

• Business expansion
• Equipment, Machinery or Raw Materials Purchase
• Cash Flow
• Working Capital Needs
• Purchase of Office Space or Business Land
• Rent and Salary Payments
• New Staff Hire
• Consolidation of debt

What is a Term loan?

Term loans can be easily managed because they are determined by the loan tenure, or period of the loan, as well as interest rates, EMIs and other factors. Term loans are dependent on –

• Terms of Loan
  The loan term will indicate the type of loan that you can get in terms of repayment. You could, for example, borrow money for a period of 12-24 months, known as a short-term loan. Or, you could get funds for a longer term, ranging between 10 and 30 years, called a long-term loan.

• Fix Loan Amount
  The amount of the term loan is fixed during the agreed period. You can borrow a term loan for your business. The amount you can borrow ranges from Rs. You can borrow a term loan for business purposes ranging from Rs. 100 Cr.

• Rates of Interest
  You can choose between a fixed rate or a variable rate of interest depending on the needs and financial situation of your business.

• Secure or Unsecured
  You can apply for either a short-term loan or a longer-term loan depending on your eligibility. This could be with or without collateral or security.

• Fixed Repayment Schedule
  You can plan your finances better when you know the amount and date of repayment. You can then choose a payment option that suits your financial situation. With a term loan, you can determine your repayment schedule using EMIs (or Equated Monthly Installments), which include both the principal amount and the interest rate. Use Ruloans EMI Calculator to calculate your EMI.

Business Loan Term Eligibility

You must meet the following criteria to qualify for a business term loan.

• Age
  If you are between the ages of 21 and 65, then you may be eligible for a term loan.

• Profession
  Term loans are available to professionals such as doctors, Chartered Accountants and Architects. Non-professionals can also apply, including sole proprietors or partners.

• Age of Business or Business Antique
  Your business can be aged between 3 and 5 years, depending on if you are a professional or non-professional self-employed.

• Credit Score
  For a term loan for business, a credit score of at least 500 is acceptable.

• Turnover Annual
  Your business’s annual turnover should, depending on the lender you choose, be at least Rs. Your business should have a turnover of over Rs.