What is a Term Loan?
A Term Loanprovides a specific amount of money that must be repaid in 1 to 10 years. These loans are commonly used for purchasing equipment, expanding a business, or any other business-related tasks.
These loans feature fixed or variable interest rates and structured repayment schedules. They are reliable for managing cash flow effectively if you run a business.
Types of Term Loans
1. Short-term Loans
Short-term Loans are usually repaid within a year and are provided to meet urgent business needs. They can be used for urgent expenses like covering operational costs, managing cash flow, or other needs. You can get quick approval and easy access to the funds but with higher interest rates compared to Long-term Loans.
2. Intermediate-term Loans
These loans have a repayment period of 1 to 5 years. They are used for larger purchases or investments. They often come with moderate interest rates and structured payment plans.
3. Long-term Loans
Long-term Loans are available for 5 to 10 years and can be used for investments like purchasing business equipment, expanding operations, or acquiring property. The benefit of a longer repayment duration is that you usually get lower interest rates. However, in most cases, lenders require collateral for such loans.
Features of Term Loans
- Fixed or variable interest rates: Term loans can have fixed interest rates with regular instalments or variable rates that may fluctuate over time.
- Easy repayment schedule: You pay monthly instalments, allowing you to manage your budget efficiently.
- High loan amount: Depending on your requirements, you can avail of a large sum of money.
- Financing for specific purposes: You can use your loan amount for various purposes, such as business operations or property purchases.
Factors influencing Term Loan approval
- Credit score: This helps the lenders decide the level of risk, amount, and interest rate.
- Income stability: Regular income can guarantee monthly instalments are paid.
- Purpose of loan: You must provide valid and clear reasons for taking the Term Loan to speed up your approval process.
- Collateral: You need to provide collateral to secure Long-term loans in most cases, but some lenders may approve your loan without collateral.
Also Read: Securing quick funds: Tips for instant Business Loans
Conclusion
Maintaining a good credit score, showing a stable income, and explaining the purpose of a Term Loan improves your chances of getting approved. Term Loans are helpful for significant financial business needs, such as financing a property purchase, undertaking major renovations or repairs, and expanding your business.
Head to Axis Bank to secure a Term Loan with ease!
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
