Definition ∞ Fixed Term Loans are lending agreements where the principal amount, interest rate, and repayment schedule are established for a predetermined duration. In decentralized finance, these loans are often facilitated by smart contracts that automatically manage the collateral, interest accrual, and repayment terms. Fixed term loans provide borrowers with predictable financing costs and lenders with a clear return profile over a set period. They introduce stability and certainty into lending markets.
Context ∞ The emergence of fixed term loans in decentralized finance offers an alternative to variable rate lending, sparking discussions about their role in managing interest rate risk for both borrowers and lenders. A key debate involves the liquidity of these fixed-term positions and the development of secondary markets for them. Future innovations will likely focus on more sophisticated fixed-income products within decentralized finance, potentially attracting institutional capital seeking predictable yields.
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