Pronunciation: [tˈɜːm lˈə͡ʊn] (IPA) 
The term loan, spelled /tɜrm loʊn/, refers to a loan that is repaid in a set period of time, as opposed to a revolving line of credit. The word "term" is pronounced with a vowel sound similar to "her" (IPA symbol ɜ), followed by an "m" and a silent "t". The word "loan" is pronounced with a long "o" sound (IPA symbol oʊ) and a silent "n". The spelling accurately represents the pronunciation of the two words when spoken together.
A term loan refers to a type of borrowing arrangement between a lender and a borrower, usually a business or an individual, where a specific amount of money is borrowed for a fixed period of time at an agreed upon interest rate. This type of loan is typically accompanied by a structured repayment plan that includes regular installments or payments over the loan term.
One key distinguishing feature of term loans is their fixed maturity. Unlike other forms of borrowing, such as lines of credit or revolving credit facilities, term loans have a clearly defined end date. This means that the borrower must repay the loan within the specified timeframe.
Term loans can be secured or unsecured, depending on the agreement between the lender and borrower. If the loan is secured, it means that the borrower has pledged collateral, such as real estate or assets, to the lender as a form of security in case of default. On the other hand, unsecured term loans do not require collateral, but they often come with higher interest rates as a result.
The purpose of a term loan can vary widely, from funding business expansions, purchasing equipment, to financing personal projects. The terms and conditions of the loan, including the interest rate, repayment schedule, and any fees or penalties, are usually negotiated between the lender and borrower and documented in a loan agreement.
The word "term loan" is composed of two parts: "term" and "loan".
The term "term" is derived from the Latin word "terminus", which means "boundary" or "end". In the context of finance and loans, a "term" refers to the designated period within which the borrowed money must be repaid. It sets the ultimate boundary or end for the loan's duration.
The word "loan" has its origin in the Old Norse word "laun", meaning "a grant" or "on loan". It later evolved in Middle English to refer specifically to money borrowed from someone or an institution that must be repaid with interest.
Combining these two words, "term loan" refers to a loan that is repaid over a predetermined period or term. The term loan can be long-term or short-term, typically involving a fixed schedule of payments until the loan is fully repaid.
