What is collateral ? what do you mean by term credit?
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Collateral is the security provided in the course of taking loan or credit which becomes active at the time of default. Collateral is sold by the holder in order to recover loss from default. The extra amount generated from the sale of collateral is given to the defaulter. If collateral is insufficient to recover the loss then the loss is born by the issuer.
The term is credit is the ability of a person to take goods without paying at the delivery based on its net worth and trust on the other party.
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Explanation:
Collateral is an assets that borrowers owns and uses as a guarantee until the loan is repaid to the lender.
About terms of credit is shown in figure
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