Question

Every loan agreement specifies an interest rate which the borrower mustpay to the lender along with
the repayment of the principal. In addition, lenders may demandcollateral (security) against
loans.Collateral is an asset that theborrower owns (such as land,building, vehicle, livestocks,
deposits with banks) and uses this as a guarantee to a lender until the loan is repaid.
If the borrowerfails to repay the loan, the lender has the right to sell the asset or collateral to obtain
payment. Property such as land titles, deposits with banks,livestock are some common examples of
collateral used for borrowing Interest rate, collateral and documentation requirement, and the mode
of repayment together comprise what is called the terms of credit. Theterms of credit vary
substantially from one credit arrangement to another. They may vary depending on the nature of the
lender and the borrower.
Fill in the blanks choosing the correct option from the brackets.

24.1 While taking a loan, borrowers look for easy terms of credit. This means--------------(Low/High)
interest rate, ---------(easy/tough) conditions for repayment, ---------(less/more) collateral and
documentation requirements. ----------- is an asset that the borrower owns and uses as a guarantee until the
loan is repaid to the lender. (4)

Answer 1

Answer:

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Explanation:

Answer 2

Answer:d

ExplaWhich of the following is an example of collateral used for borrowing?

a) Property b) Deposits with banks c) Livestock d) All of thesenation: