Term Loan
Categories: Bonds
Term. As in: periodic. A set period of time, like the way that bad decisions by U.S. presidents are limited, in that they can only hold office for 2 terms of 4 years each. That way, the stupidity is spread around more broadly.
Term loans follow the same patterning. You borrow $22,000 to buy a car from Smilin' Sam's Sybaritic Subaru, and you pay it off in 5 years, or 60 payments of about 500 bucks each (interest gets bundled in there as well).
So why is it even a Thing to have the term concept in a loan? Well, by "reminding" borrowers every month that they owe something, it keeps them focused on reserving enough cash to make good on their promise in borrowing the money. And, over time, as the debts owed decline, the risk mitigates on both sides of the handshake.
Term loan. Very different from a tern loan. Those birds never pay back the fish they "borrow." Jerks.
See: Zero Coupon Bonds.
Related or Semi-related Video
Finance: What is Term To Maturity?12 Views
finance a la shmoop what is term to maturity alright people well it's kind
of a lifecycle of a bond like a bond is issued or sold it has an assay a 15 year [Bond timeline appears]
duration somebody's written that money for 15 years its term to maturity when
it first was issued was 15 years but if you bought that bond nine years into it
some you know maturation process when all the hairs growing in funny places [Hairs grow out of bond]
then at that point it would have six years current maturity well what goes on
between these years interest payments and then eventually at the very end the
issuer pays back the principal to the investor who bought the bond and [Money transfers from issuer to investor]
everyone goes away happy-ish well bonds carry gradations in short medium and
long term terms to maturity like short term generally is considered one to five [Different types of bond appear]
years mid term medium term and something like that is like five to a dozen years
and long term is like up to you know thirty or even a hundred years after
that dozen or so no hard lines here they're all dotted and yeah Disney [Man discussing bonds at DisneyLand]
actually sold a hundred year bonds at one point and they are of course the
happiest bonds on earth [Disney bonds appear]