Loan Term
Definition:
A loan term is the length of time that you have to repay a loan. It is typically expressed in years, and it can vary depending on the type of loan and the lender.
Example:
The loan term is an important factor to consider when taking out a loan, as it will affect the monthly payments that you will need to make. For example, a loan with a shorter term will have higher monthly payments than a loan with a longer term.
There are two main types of loan terms: fixed-term and variable-term.
Fixed-term loans: With a fixed-term loan, the interest rate and monthly payments will remain the same for the entire term of the loan. This can be helpful for budgeting, as you will know exactly how much you will need to pay each month.
Variable-term loans: With a variable-term loan, the interest rate and monthly payments may change over time. This is because the interest rate is usually tied to an underlying index, such as the prime rate. If the index goes up, the interest rate on your loan will go up, and your monthly payments will increase.