When starting or expanding a business, one of the most common ways to fund it is through a term loan. A term loan is a type of loan in which the borrower receives a lump sum of money that is to be paid back over a set period of time, typically with interest. In India, term loans are offered by banks and other financial institutions to both individuals and businesses.
In this comprehensive guide, we will discuss everything you need to know about term loans in India, including the types of term loans, the eligibility criteria, the application process, and the repayment options.
Types of Term Loans in India:
Secured Term Loans: These are loans that are backed by collateral such as property, inventory, or equipment. Since the lender has the security of collateral, they offer lower interest rates and longer repayment terms.
Unsecured Term Loans: These are loans that do not require collateral but usually have higher interest rates and shorter repayment terms than secured loans.
Working Capital Term Loans: These are loans that are specifically designed to fund the day-to-day operations of a business. They are short-term loans that can be repaid within a year.
Eligibility Criteria:
To be eligible for a term loan in India, the borrower must meet certain criteria, including: Age: The borrower must be at least 21 years old.
Credit Score: The borrower must have a good credit score.
Business Experience: The borrower must have a minimum of three years of experience in the industry.
Income: The borrower must have a minimum annual income of Rs.1 lakh. Application Process:
The application process for a term loan in India typically involves the following steps: Research and compare the different lenders and their loan products.
Check your eligibility for the loan.
Fill out the loan application form and submit it along with the necessary documents.
Wait for the lender to review your application and make a decision.
If your application is approved, sign the loan agreement and receive the funds. Repayment Options:
The repayment options for a term loan in India depend on the type of loan and the lender. Some lenders offer fixed or floating interest rates, while others offer flexible repayment options such as prepayment or part-payment without any penalty charges. It is important to read the loan agreement carefully and understand the repayment terms before signing it.
In conclusion, term loans are a popular way to finance a business or personal expenses in India. Before applying for a term loan, it is important to understand the different types of loans available, the eligibility criteria, the application process, and the repayment options. With proper research and planning, a term loan can help you achieve your financial goals.