Bilateral Loans

A bilateral loan is a kind of loan that is formed between a single borrower and a single lender.

Types of Bilateral Loans

There are three common types of bilateral loans, namely:

  1. Overdraft - An overdraft facility is the most conventional method a bank or any lending institution can use in financing an individual or a company. The borrowed money is paid through the borrower's future operating income. Overdraft has a higher interest rate compared to that of a term loan. But unlike the latter, the borrower can repay the loan anytime without giving prior notice to the lender.
  2. Term loan - With term loan, a specified amount and a specified length of repayment period is agreed by the borrower and lender. The typical maturity date of this type of facility is five years. However, customers with good credit history can be given up to ten years or more to repay the debt.
  3. Revolving credit facility - This loan offers a specified maximum amount of fund to the borrower and should be paid on specified terms and conditions indicated in the agreement. When the customer repays a fraction of the loan capital, this will give him the opportunity to borrow additional funds.