Rita has taken a loan of Rs. 7 lakhs from the bank to purchase a car. The annual interest rate on
the loan is 14.5 per cent and the loan is to be repaid in 3 years in monthly instalments.
The bank retained the papers of the new car as collateral, which will be returned to Rita
only when she repays the entire loan with interest.
Analyse the loan information given above, considering one of the following correct option.
a. Mode of re-payment
b. Terms of credit
c. Interest on loan
d. Deposit criteria
Answers
The Loan information given above is Terms of credit.
b. Terms of credit
Explanation:
These include financing costs, guarantees, required paperwork, and the financial aspects of the reimbursement method. It can start with a credit plan and then depend on the idea of the bank and the borrower. This is exceptionally unusual between formal and casual moneylenders.
Rita is worth Rs. 7 lakhs from the bank to buy the vehicle.
Annual loan cost - 14.5%
Credit period - 3 years
Guarantee - New vehicle documents.
The collateral used in this model is a resource that the borrower can use as a guarantee to Moneylender to repay the credit. For this situation, Rita used the papers of the new vehicle as a guarantee that the entire credit amount will be refunded after repaying the interest.
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