A loan term is the time period over which the loan will be repaid. The term of a loan is usually, but not always, fixed at the time the loan was initially agreed. It could be absolutely anything but, for a bank loan, a typical term might be five to ten years. During the term of the loan, in most cases the borrower will be required to make regular payments which should eventually cover both the capital originally borrowed and the interest owed on it. Some lending institutions set maximum terms for a loan based on the purpose for which the amount lent is going to be used. It is customary for loans granted to purchase real estate or items of capital equipment to have longer terms than loans granted for other purposes. Lending companies which are financing company equipment also provides specialized equipment type financing.

It is possible for a loan to be settled prematurely by the borrower. In this case the loan does not run to its natural term. Some loan agreements require borrowers to pay penalty fees if the debt is settled prematurely. This is to compensate the lender for the profit which will be lost through the borrower no longer needing to pay interest rates on the initial debt.