What is meant by the term 'term' in finance?

The term 'term' in finance refers to the total duration of a loan or investment. It encompasses the length of time over which the borrower or investor is obliged to maintain the loan or investment before it matures or is due for repayment. This concept is crucial because it directly affects the interest rate, repayment schedules, and overall financial planning for both lenders and borrowers.

Understanding the duration helps investors gauge when they will receive their principal back and determine how much interest they will earn or owe over that period. Different types of financial products have varying terms, such as short-term, medium-term, or long-term investments, each serving different investment strategies and risk profiles.