Question

What is terms of credit????

Answer 1

Hi,

The four terms of credit are :

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

2.Collateral- It is an asset that the borrower owns and uses this as aguarentee 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.

Hope it helps........

Answer 2

Terms of Credit is a composition of interest rate, collateral, documentation and mode of repayment.

The various terms of credit are as under:

1. Interest Rate- It is the amount which the borrower repays along with the principal amount. It is fixed by the lender at the time of giving loans.

2. Collateral- It can be any form of asset primarily owned by the borrower which is used as a form of deposit to the lender to act as a guarantee until the complete repayment if the loan is covered.

3. Documentation- It comprises of all the valid documents relating to the details of the borrower and the terms and conditions of the agreement. Documentation acts as a form of formal agreement between two parties as it facilitates the process of record keeping.

4. Mode of Repayment- It generally refers to the manner in which the two parties agree for the loan to be repaid.