A term loan is one of the most popular ways to finance a business’s expansion or start-up. A term loan is a loan where the borrower is given a lump sum of money which is then to be repaid over a specified time period, usually with interest. Banks and financial institutions offer term loans to Indian businesses and individuals.
This comprehensive guide will cover all aspects of term loans in India. It includes the types, eligibility criteria, application process and repayment options.
There are many types of term loans available in India
Secured Term Loans (Secured Term Loans): These loans are secured by collateral like property, inventory, or equipment. They offer lower interest rates and have longer repayment terms because the lender is backed by collateral.
Unsecured Term Loans (Unsecured Term Loans): These loans do not require collateral, but they have lower interest rates and shorter repayment terms that secured loans.
Working Capital Term Loans – These loans are designed to finance the day-today operations of a company. These are short-term loans that can usually be repaid in one year.
The borrower must meet the following criteria to be eligible for a term loan from India:
Age: Borrower must be at minimum 21 years of age
Credit Score: A borrower must have good credit.
Business Experience: A minimum of three years’ experience in the sector is required.
Income: The borrower should have an income of at least Rs.1 lakh annually.
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These are the steps that you will need to follow when applying for a loan term in India:
Compare the loan products and lenders available and research them.
Verify your eligibility for the loan.
Complete the loan application form.
Wait for the lender’s review of your application to make a decision.
Once your application has been approved, you will be able to sign the Business Loan agreement and get the funds.
The type of loan and lender will determine the repayment options for a term loan. Fixed or floating interest rates are offered by some lenders, while others offer flexible repayment options like prepayment or partial payment without penalty fees. Before signing a loan agreement, it is crucial to carefully read and understand the repayment terms.
Term loans are popular in India to finance personal or business expenses. It is important to fully understand the terms of the loans, their eligibility criteria, how the application process works, and what the repayment options are before applying for one. A term loan can be a great way to reach your financial goals if you do your research well.