Question

What are the terms of credit .explain any 5 points.

plzzz ans in detail........

Answer 1

Credit (loan) refers to an agreement in which the lender supplies the borrower 

with money, goods or services in return for the promise of future payment. The 

terms of credit are the following: 

i. Interest rate: Formal sector demands less rate of interest compared to informal 

sector. At present, they demand 8 to 12 % interest rate. 

ii. Collateral and documentation requirement: It refers to the security against the loan 

demanded and kept by the lender until the loan is paid back. It can be gold or 

documents of properties or other certificates attached with the application. 

iii. The mode of repayment: The borrower should pay back the interest and the 

principal amount weekly or monthly by cash or cheques as decided at the time of 

making agreements

Answer 2

The four terms of credit are : 

1 Interest rate- The borrower has to pay a sum of money as interest along with the principal amount.

 2.Collateral- It is an asset that the borrower owns and uses this as guarantee to the lender until the loan is repaid. 

3. Documentation- Proper documents of borrowing with all the terms and conditions must be submitted.

 4. Mode of repayment - The mode through which the borrower will repay the loan must be clearly mentioned.

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