A term loan provides a business with a great way to obtain a lump sum of money that can be repaid with equal, fixed payments over a set period of time.
The interest you owe is front-loaded, so the majority of your installment goes toward interest at the start of your loan term. With each additional payment, a higher percent of the payment is used to pay off the loan’s principal.
Before applying for a term loan, utilize the Lendzero Term loan calculator to see your monthly payments. Insert the information below:
Use our Term loan calculator to calculate the expense of your term loan by plugging in the numbers.
A five-year term may seem more appealing compared to a two-year term since your monthly payments will be less. Just remember that extending the loan term means you’ll pay more in total interest, which makes the loan more expensive overall.
For example, Tom’s Bakery wants a $100K loan for new equipment and repairs. Tom applies for a term loan and receives approval for the $100K loan amount at an interest rate of 5% over two years.
By entering Tom’s $100K loan amount, 7% interest rate and two-year repayment term into the Term loan calculator, we can see Tom would need to pay $4,477 month for two years.
The Term loan calculator will show you the exact amount you’ll need to repay each month in both interest and principal.
To be clear, definitions are below
Keep in mind your lender could charge you an origination fee upfront.
Lenders have different types of fees and there are many factors they consider when it comes to determining the size of their fee for each loan.
For example, some may require a fee be paid based on the length of the repayment term. Other lenders might charge one flat fee based on the interest rate. Finally, some might charge a fee based on a percent of the total loan amount.
In addition, if you default or miss a payment, there could be an additional fee.
Lastly, some lenders may charge a maintenance fee if you have a credit line that is inactive.
