Scroll Top

Loan Term Definition

Home | Glossary | Loan Term Definition

Receiving a loan seems simple, right? You borrow money now and promise to pay it back a little at a time. Though the concept is easy to understand, different aspects of loans make them more complex. When you need money and are looking into getting a loan, you must understand important phrases such as “loan term.”

Here, we’ll answer your question: what does “loan term” mean? And we’ll clarify its difference with “loan terms” (yes, they’re two different things) so you will be better prepared to take on the responsibility of a loan.

What Is a Loan Term?

The meaning of “loan term” is simple. A loan term is the length of time you have to pay off the loan. For example, in a mortgage, it’s common to commit to either 15 or 30 years in which you will pay off the loan. That time period is your loan term. For smaller loans like a payday loan or personal loan, you may only have a few months or even weeks before you need to pay the money back with interest.

What Is a Common Loan Term?

The length of a loan depends greatly on the amount of money you are borrowing. Larger sums mean you will usually have more time to pay it off. Some common loans and their terms are:

  • Mortgages: These usually have a loan term of either 15 or 30 years, with 30 being the most common.
  • Student Loans: Student loans often last 10 years, but some can last up to 30.
  • Auto Loans: Most auto loans offered last between two and six years.
  • Personal Loans: Personal loans vary based on how much you borrow. They can last months up to years.
  • Payday Loans: These are quick loans meant to be paid back by your next paycheck, so they only last two weeks or a month.

Can I End a Loan Term Early?

Yes, but your lender may have penalties for doing so. Lenders make money off of interest rates. If you repay a loan earlier than expected, they stand to make less money off your loan. Many lenders will have prepayment penalties when you pay off a loan, so carefully review your loan contract and ensure you can afford it before you decide to pay it off early.

What Happens at the End of a Loan Term?

You are expected to finish paying off your balance when you reach the end of your loan term. This should be simple if you have made your payments consistently on time. However, you can apply for an extension if you need more time to pay it off. Extending a loan may incur more fees, so prioritize paying off your loan regularly.

What Does Loan Terms Mean?

The plural form, “loan terms,” has an entirely different meaning. Loan terms or loan terms and conditions refer to your loan details. The loan terms can include:

  • Couple working with loan officerLoan term or length of the loan
  • How much money was borrowed
  • Your APR
  • The details of your monthly payments
  • Fees
  • Due date
  • If your loan has fixed or variable interest rates
  • Penalties for late payments or ending the loan early

Should I Compare Loan Terms and Conditions?

Absolutely! When looking for a loan, compare the loan terms and conditions available at each lender. When you find the best deal, you can take it to competing lenders as leverage and see if they will match it or give you an even better deal.

Power Finance Texas Can Help You

Power Finance Texas has years of experience providing quick and easy loans to those with a Texas driver’s license. The personal loans they offer take only minutes to apply for and can be approved quickly. You can get the money (up to $1,250) in your bank account in as little as a day, so you can afford exactly what you need.

Visit the Power Finance Texas site today and fill out an easy application to see how much money you can get today!