Legal Definitions - time loan

A time loan, also commonly referred to as a term loan, is a type of credit arrangement where a borrower receives a lump sum of money and agrees to repay it, along with any accrued interest, over a predetermined schedule. This schedule typically involves regular, fixed payments made over a specific duration, or 'term,' until the entire amount is satisfied. Unlike a revolving line of credit, a time loan has a defined end date when the loan is expected to be fully repaid.

• Example 1: Small Business Equipment Purchase

  A local bakery decides to upgrade its ovens and takes out a loan from a bank to cover the cost. The loan agreement specifies that the bakery will repay the principal amount, plus interest, over a period of five years, making equal monthly payments. This is a time loan because the repayment period is fixed at five years, and the bakery has a clear, scheduled plan for when the loan will be fully repaid.

• Example 2: Personal Vehicle Financing

  Marcus purchases a new car and finances it through a dealership. His loan contract states that he will make 72 fixed monthly payments over six years until the car loan is completely paid off. This arrangement is a time loan because it has a specific, predetermined duration (six years) and a consistent payment schedule that leads to the loan's full satisfaction by a set date.

• Example 3: Home Mortgage

  Sarah and Tom secure a 30-year mortgage to buy their first house. They commit to making monthly payments for three decades until the entire loan balance, including interest, is paid off. This mortgage is a classic example of a time loan, as it has a fixed duration (30 years) and a predictable repayment plan that ensures the loan will be fully retired by the end of that term.