Terry said: "Fair play to Michael. We have got a lot of players at Chelsea and he has been eager to go out and prove that he is good enough.
"Myself and Lamps (Frank Lampard) spoke to Stuart Pearce and he said Michael has been his best player in the Under-21s.
"He will gain from the experience and his form has been fantastic for Wolves. They have had three or four wins since he has been there and he has got a bright future ahead of him.
"I don't want to put too much pressure on the lad but we all realise he is one for the future.
"He could come back and be in the Chelsea side, quite possibly. He has been eager to break into the squad. It is very unfortunate for all the young players at Chelsea that we have got such a big squad.
"In the Carling Cup, when the manager leaves out the likes of myself and Lamps, there are players who are not playing week in and week out who deserve to play.
"They get paid a lot of money to be part of our squad and it is difficult sometimes to throw the younger lads in but he will get his chance, I am sure."
Terry added: "I went on loan to Nottingham Forest and it is a good experience. You go out and you have to stand on your own two feet.
"I heard Mick McCarthy say he turned up there on his own, he is living on his own and getting on with his football and that is all that the boy wants to do.
"He wants to play football regularly and, if he can do that at Wolves and other big clubs, he has got the chance to come back and maybe do that at Chelsea."