Why Choose Sulekha?
Sulekha is your go-to platform for finding a wide variety of loan providers catering to diverse financial needs such as personal loans, term loans, home loans, vehicle loans, car loans, education loans, and more. With Sulekha, you gain access to a comprehensive network of reputable lenders, ensuring you find the perfect match for your specific requirements. The platform simplifies your search process, saving you time and effort by connecting you with trusted professionals who can offer tailored loan solutions. Choose Sulekha for a seamless and efficient loan-seeking experience.
1. When to Consider Taking Out a Term Loan?
- Business Expansion: Opening new locations or upgrading facilities often requires significant capital. A term loan can provide the necessary funds to support these growth initiatives, allowing you to spread out the costs over time.
- Large Capital Expenditures: When purchasing expensive equipment or real estate, a term loan can be beneficial. This allows businesses to invest in assets that enhance productivity and profitability without depleting cash reserves.
- Refinancing Existing Debt: Consolidating multiple high-interest debts into a single term loan with a lower interest rate can reduce overall interest payments and simplify financial management, making it easier to focus on business operations.
- Stable Revenue Stream: If your business has a predictable revenue stream, managing the monthly payments of a term loan can be feasible. This stability ensures that loan repayments can be made without disrupting other financial commitments.
- Specific Funding Needs: For working capital, marketing campaigns, or product development, a term loan can provide the required funds. This targeted use of the loan can drive future revenue growth and operational efficiency.
- Building Credit History: For new businesses, taking out a term loan and making timely payments can help establish and build a strong credit history. This can improve future borrowing terms and overall financial credibility.
- Emergencies and Unexpected Opportunities: Term loans can offer quick access to funds during emergencies or when lucrative business opportunities arise. This flexibility allows you to address urgent needs or capitalize on time-sensitive opportunities.
2. Eligibility Criteria for Taking a Term Loan?
- Age of the Applicant: Individuals should typically be between 21 to 65 years old at the time of loan maturity. For businesses, lenders generally require the business to have been operational for at least 2-3 years.
- Credit Score: A good credit score is crucial, with most lenders preferring a score of 650 or above. A higher credit score can increase the chances of loan approval and may result in more favorable terms and interest rates.
- Income and Employment Stability: Individuals must provide proof of steady income through salary slips, income tax returns, and bank statements. Businesses need to show financial statements, tax returns, and consistent revenue over the past few years to demonstrate financial stability.
- Business Financial Health (for business loans): Lenders look for profitable businesses with positive cash flow to ensure loan repayment ability. Detailed financial records and a clear picture of future earnings potential are essential for approval.
- Collateral: Term loans are often secured, requiring collateral such as property, equipment, or other valuable assets. The value and type of collateral can significantly impact the loan amount and terms offered by the lender.
- Loan Purpose: Clear documentation and explanation of the loan purpose, whether for business expansion, equipment purchase, or working capital, is essential. This helps lenders understand how the loan will be used and its expected benefits.
- Existing Debt: Lenders assess existing debt obligations to ensure the applicant can manage additional loan repayments without financial strain. A manageable level of existing debt improves the chances of loan approval.
- Business Plan (for business loans): A detailed business plan outlining the loan purpose, expected benefits, and repayment strategy is crucial. This plan helps lenders understand how the loan will contribute to business growth and profitability.
- Legal and Regulatory Compliance: The business should comply with all relevant laws and regulations, and proper licensing and permits should be in place. Compliance ensures that the business operates within legal boundaries, reducing risks for lenders.
- Relationship with the Lender: Existing relationships with the lender, such as maintaining business accounts or previous loans, can be beneficial. A good repayment history with the lender can positively influence the loan approval process and terms.
3. What are the Benefits and Advantages of a Term Loan?
- Predictable Repayment Schedule: Term loans come with fixed monthly payments, making it easier for borrowers to budget and manage cash flow. They have a specific end date, providing clarity on when the debt will be fully paid off.
- Fixed Interest Rates: Many term loans have fixed interest rates, ensuring that the cost of borrowing remains constant throughout the loan term. This stability protects borrowers from fluctuations in interest rates.
- Larger Loan Amounts: Term loans often provide larger sums of money compared to other types of loans, making them suitable for significant investments such as business expansions, equipment purchases, or real estate acquisitions.
- Flexibility in Usage: Borrowers can use term loan funds for various purposes, including working capital, purchasing assets, refinancing other debts, or funding specific projects.
- Builds Credit History: Successfully repaying a term loan can help improve the borrower's credit score, enhancing their ability to secure future financing on favorable terms.
- Interest Tax Deduction: For businesses, the interest paid on term loans is often tax-deductible, reducing the overall cost of borrowing.
- Longer Repayment Periods: Term loans can have extended repayment periods, sometimes up to 10-30 years for real estate loans, making the payments more manageable.
- Structured Repayment Plans: Many term loans are amortized, meaning each payment covers both interest and principal, gradually reducing the loan balance over time.
- Potential for Lower Interest Rates: If the term loan is secured by collateral (such as property or equipment), borrowers may benefit from lower interest rates compared to unsecured loans.
- Enhanced Business Growth: Term loans provide the necessary capital for businesses to invest in growth opportunities such as expanding operations, entering new markets, or developing new products.
4. Important Factors to Consider When Taking a Term Loan?
- Interest Rate: Determine whether the interest rate is fixed or variable, as this affects your monthly payments and total interest cost. Look at the Annual Percentage Rate (APR), which includes the interest rate plus any fees or other costs, providing a more accurate picture of the loan's overall cost.
- Loan Amount: Ensure the loan amount meets your financial needs without being excessive, as borrowing more than necessary can lead to higher interest payments. It's crucial to find a balance that covers your needs but remains manageable.
- Repayment Term: Consider whether a short-term or long-term repayment period is better for your financial situation. Shorter terms generally have higher monthly payments but lower total interest costs, while longer terms have lower monthly payments but higher overall interest.
- Monthly Payment: Ensure the monthly payment is affordable within your budget. Use a loan calculator to understand how different terms and interest rates impact your payments, helping you to choose a loan that fits your financial plan.
- Fees and Charges: Be aware of any origination fees, prepayment penalties, and late fees associated with the loan. These can significantly impact the overall cost and flexibility of the loan.
- Credit Score Requirements: Your credit score affects your eligibility and the interest rate offered. Ensure your credit score meets the lender's requirements to qualify for favorable terms, and work on improving it if necessary.
- Collateral: Determine if the loan is secured or unsecured. Secured loans require collateral, which can be seized if you default, while unsecured loans do not require collateral but typically have higher interest rates.
- Lender's Reputation: Research the lender’s reputation, customer service, and reviews. A reputable lender will offer transparent terms and good customer support, ensuring a smoother loan process.
- Loan Purpose: Clearly define the purpose of the loan and ensure it aligns with your financial goals. Different loans may have specific terms based on their intended use, such as business expansion or home renovation.
- Economic Conditions: Consider current and future economic conditions that may affect your ability to repay the loan. Economic downturns can impact your income and employment, affecting your repayment capacity.
- Documentation and Eligibility: Understand the required documentation and ensure you meet all eligibility criteria, such as proof of income and employment history, to avoid delays or rejections.
- Legal and Regulatory Aspects: Be aware of any legal or regulatory requirements related to the loan, especially if borrowing from a foreign or online lender, to ensure compliance and avoid potential legal issues.
5. Term Loan Interest Rates?
| Bank Name |
Term Loan Interest Rate (per annum) |
Loan Amount |
Tenure Range |
| State Bank of India |
7.50% - 10.25% |
Up to ₹2 crore |
1 - 15 years |
| HDFC Bank |
8.25% - 11.50% |
Up to ₹10 crore |
1 - 15 years |
| ICICI Bank |
8.35% - 11.75% |
Up to ₹5 crore |
1 - 10 years |
| Axis Bank |
8.40% - 11.90% |
Up to ₹5 crore |
1 - 10 years |
| Punjab National Bank |
7.75% - 10.50% |
Up to ₹1 crore |
1 - 10 years |
| Bank of Baroda |
7.60% - 10.40% |
Up to ₹2 crore |
1 - 12 years |
| Canara Bank |
7.85% - 11.20% |
Up to ₹2 crore |
1 - 12 years |
| Kotak Mahindra Bank |
8.50% - 12.00% |
Up to ₹10 crore |
1 - 15 years |
| Union Bank of India |
7.70% - 10.75% |
Up to ₹1 crore |
1 - 10 years |
| IDFC First Bank |
8.75% - 12.50% |
Up to ₹5 crore |
1 - 10 years |
Please note: Interest rates and fees can vary based on the loan amount, tenure, credit profile of the borrower, and specific bank policies. It is advisable to check with the respective bank for the most accurate and updated information.
