Term loan refers to a type of credit vehicle in which money is lent to another party in exchange for future repayment of the value or principal amount. In many cases, the lender also adds interest and/or finance charges to the principal value that the borrower will have to pay in addition to the principal balance.

Loans can be for a specific, lump sum amount, or they can be available as an open-ended line of credit up to a specified limit. Loans come in many different forms including secured, unsecured, commercial and personal loans.

  • A loan is when money is lent to another party in exchange for repayment of the principal amount and interest of the loan.
  • The loan terms are agreed upon by each party before any money is forwarded.
  • A loan may be secured by collateral such as a mortgage or it may be unsecured such as a credit card.
  • Revolving loans or lines can be spent, repaid and re-spend, whereas term loans are fixed rate, fixed payment loans.