PAYMENT PERIOD

A loan’s term can refer to several things. In most cases, the term is either:

1. How long the loan will last if you make the required minimum payments each month
2. Features of the loan that you agree to, which are sometimes called the terms and conditions

Time as Loan Term

The first example is about time: How long will the loan last until it is completely paid off with regular payments? The time it takes to eliminate debt is a loan’s term. Loans may be short-term loans or long-term loans.

In some cases, the term is easy to identify. For example, a 30-year fixed rate mortgage has a term of 30 years. Auto loans often have 5 or 6-year terms, although other options are available (auto loans are often quoted in months, such as 60-month loans). However, loans can last for any length of time that a lender and borrower are willing to agree on.

Loan Periods: Loan periods are also related to time, but they aren’t the same as your term. Depending on the specifics of your loan, a period might be the shortest period of time between monthly payments or interest charge calculations. In many cases, that’s one month or one day. For example, you might have a loan with an annual rate of 12%, but the periodic (or monthly) rate is 1%

Terms and Conditions of a Loan

Loan terms can also be the characteristics of your loan, which your loan agreement describes. When you borrow money, you and your lender agree to specific conditions—the "terms" of your
loan. The lender provides a sum of money, you repay according to an agreed upon schedule, and if something goes wrong, each of you has rights and responsibilities that the loan agreement provides details on.

Some of the most common terms in loan agreements appear below.

1. Interest Rate
2. Monthly payment
3. Prepayment Penalties
4. Balloon Payments