Term Loan – Eligibility, Interest Rates and Calculator

Term Loans are loan that is taken from the lender for a specific time and has to be repaid in regular installment.

The period to pay for the Term Loan can be anywhere from 1 year to 30 years depending on the amount and other factors.

Terms loans are mostly taken by small businesses however, some individual also take these loans to finance their venture. In this article, we will discuss what a is Term Loan, its eligibility, interest rate, and much more.

But first, let’s find out what are the different Term Loan interest rates charged by some of the prominent banks.

Term Loan - Eligibility, Interest rates and Calculator

Term Loan Interest Rates Offered by Top Banks/NBFCs

The following are the Term Loan Interest Rates offered by Top Banks/NBFCs-

Bank/NBFCsInterest Rate
Axis Bank14.95% – 19.20% p.a.
Bajaj Finserv9.75% – 30% p.a.
Flexiloans1% per month onwards
HDB Financial Services Ltd.Up to 36% p.a.
HDFC Bank10% – 22.50% p.a.
IDFC First Bank10.50% p.a. onwards
Indifi1.50% per month onwards
Kotak Mahindra Bank16% – 26% p.a.
Lendingkart12% – 27% p.a.
Mcapital2% per month onwards
NeoGrowth Finance19% – 24% p.a.
Tata Capital12% p.a. onwards
UGRO Capital9% – 36% p.a.

Features of Term Loan

The following are the features of a term loan-

  • The term loan can be taken for a long period which is negotiated when applying for the loan
  • A fixed time frame is decided for the repayment of the loan
  • The lender and lender can reschedule the repayment if the business is going through a hardship
  • The lender charges a commitment fee on the loan amount that one has not utilized
  • In case of default, the lender may levy penalties

Types of Term Loan

There are three types of term loan available for you to take, which is as follows-

Short Term Loan

Short-term loans are those loans that are provided to you for a fixed short period. The period of the loan is 24 months which has to be paid within this time limit.

Long Term Loan

A loan with a repayment period of more than 5 years is considered to be a long-term loan.

Intermidiate Term Loan

Loan repayment under the intermediate-term loan is anywhere from 2 years to 5 years and is considered to be an intermediate-term loan.

Pros and Cons of Term Loan

There are pros and cons to getting a term loan, which is as follows-

Term Loan Pros

  • The term loan is cheap for the borrower as compared to other products
  • The interest paid by the borrower is tax deductible which can offer you a tax benefit while filling your Income Tax
  • The term loan can be negotiated meaning, you can negotiate various terms and condition
  •  The term loan is considered to be debt financing and hence, the equity does not get liquidated

Term Loan Cons

  • Debt financing increases the financial risk of the company if the repayment of the loan is not done
  • If the borrower fails to repay the debt, then the lender may ask the company to liquidate
  • The lender may ask the borrower to repay by selling the equity of the company if the borrower fails to repay the loan

How to Apply for a Term Loan?

You can apply for a Term Loan by following these steps-

  • The very first step is to finalize a few banks based on their eligibility criteria for the Term loan product.
  • After finalizing three banks, visit each of their banks and ask the bank representative for the term loan product
  • Now, you’ll have to negotiate and tell them your financial demand which is based on the best offer out of those three, you can get your term loan an estimate of the loan
  • You can then fill out the application form of your finalized bank or NBFC and attach the documents mentioned below followed by submitting the file to the bank representative
  • The bank representative will process your documents and may send a few loan officers to interview and evaluate your profile after which the decision of the bank/NBFC will be provided
  • You can accept or reject the final offer from the bank and based on the interest rate and tenure, your application can be finalized

Documents Required for Applying for a Term Loan

The following are the documents required for applying for a term loan-

  • Proof of the business- Business Registration documents, Partnership Needs, etc.
  • Bank statements for the previous 12 months
  • KYC documents – PAN Card, Aadhaar Card, etc.
  • Filled up the application form with the passport-size photograph
  • Last 2 years Audited Financial statements.
  • ITR of the latest completed FY
  • Tax Return of the latest completed FY
  • CMA Data including :
    • Financial projections for the total tenure of Term Loan
    • DSCR calculation for a term loan (if any) for total tenure


Which type of loan is better Long term or short term?

The loan type that best suits your requirements can be either of these which depends on your requirement and the agreement that you can do.

Can I get a term loan for the expansion of my business?

Yes, you can get a term loan for the expansion of your business. This type of loan is popular among businesses as it provides good loans at good interest rates.

Is a credit score required for applying for the term loan?

Yes, a credit score is required to apply for not only a term loan but any loan. A good credit score will ensure you get the loan amount easily and without any scrutiny from the bank.