What are the terms of credit?

cbse
economics
money-and-credit
cbse-class-10
cbse-class-10-social

#1

What are the terms of credit?

Answer:

  • Every loan agreement specifies an interest rate which the borrower must pay to the lender along with repayment of the principal.
  • In addition, lender may demand collateral, i.e., an asset that the borrower owns and uses this as a guarantee until the loan is repaid.
  • If the borrower fails to repay the loan, the lender has the right to sell the collateral to obtain payment.
  • Terms of credit comprise interest rate, collateral and documentation requirement, and the mode of repayment.
    *The terms of credit vary substantially from one credit arrangement to another. They may vary depending on the nature of the lender and the borrower.

#2

Interest rate, collateral,documentation required and mode of repayment