Term
The term, calculated from the conclusion of the credit or loan agreement, is the period at the end of which the borrower must repay the loan in full, including its interest and other costs.
In the description of each loan scheme, banks usually define a minimum and a maximum period in terms of term. This refers to the given credit obsession loan type can be taken for what time periods - one overdraft for example, its term is typically a minimum of 1 and a maximum of 3 years.
When the company decides to take out a loan, it also agrees with its bank on the exact duration of the given contract. The term is the time period that starts from the disbursement of the loan and lasts until the borrowed amount, together with all its costs (including interest and that other bank fees also), repays the bank according to the schedule specified in the contract.
The term of loans can range from a few months to 15-20 years. Short-term loans are usually for a maximum of 1 year, medium-term loans for a period of 1-5 years. A loan with a term of more than 5 years is a long-term loan.
If the term expires, the credit or loan agreement is terminated, even if the borrower has not fulfilled his repayment obligation in full. However, the expiration of the credit or loan agreement does not exempt the borrower from paying the entire outstanding debt. However, it is advisable to avoid the latter situations: in addition to being costly, it can also endanger the future functionality of the company.
Last edited: January 10, 2023