Top features of term loan you need to be aware of2 min read
One of the most common and preferred forms of borrowing for businesses in the country, term loan offer an ideal solution for those in need of funds. The loan is available for the short term and long term and there is a fixed and floating rate of interest. It is one of the simplest forms of business loan in India. The repayment tenure of the loan ranges between 1 year to 7 years and it is offered for various proposes. You can use the funds for business expansion, to buy raw materials, to purchase equipment, or to meet the working capital requirements. Let’s take a look at the top features of the loan.
- Eligible entities
The loan is available for individuals, self-employed, salaried professionals, manufacturers, startups, retailers, small business owners, private companies, partnerships firms, limited liability partnerships, MSMEs, and co-operative societies. Since the loan is available for all types of businesses, it has become the preferred choice of many. The minimum age requirement of the applicant is 18 years and the maximum is 65 years.
2. Types of the loan
There are two types of term loans available today. Short term loan ranges from 1 to 3 years and a long term loan that has a tenure of up to 10 years and can be extended to 30 years for manufacturing firms.
3. Purpose of the loan
The loan is given for any purpose in the business but since it has a high loan amount and long tenure, it is applied for incurring capital expenditure like buying land, buying machinery, constructing buildings, or for the purchase of commercial vehicles in the business.
4. Interest rate
There is a fixed rate of interest and floating interest on the loan. The fixed interest rate remains the same throughout the tenure of the loan while the floating rate changes with time. The interest rate will vary from one lender to another and will also depend on factors like your credit score and repayment history. It is best to compare the rate of interest with different lenders and then make an application. To enjoy a low-interest rate, you must have a strong credit score.
5. Collateral requirement
Term loans can be either secured or unsecured. If you own an asset you would like to hypothecate with the lender, you can apply for a secured loan and if you are not willing to go through the process of hypothecation, you need to choose an unsecured loan option.
Term loans can be processed quickly and the funds are disbursed immediately into your account. It has simple and straightforward terms on the loan which works in favor of many businesses. If you need funds for any purpose in the business, it is best to consider term loans because they can be aligned with your needs. The loan serves different purposes and is a one-stop solution for all business owners. Scout the market for lenders that offer the loan at low interest and flexible repayment tenure.