Written by the Fiveable Content Team • Last updated August 2025
Written by the Fiveable Content Team • Last updated August 2025
Definition
A term loan is a loan from a bank for a specific amount that has a specified repayment schedule and either a fixed or floating interest rate. It is designed to finance long-term investments, like machinery or building expansions.
Interest Rate: The percentage of a sum of money charged for its use, determining how much extra needs to be paid back on top of the borrowed amount.
Repayment Schedule: A detailed plan outlining when and how much the borrower needs to pay back to the lender over the life of the loan.
Floating Interest Rate: An interest rate that changes over time with market conditions, affecting how much borrowers need to pay on their loans periodically