Why are terms and conditions like interest rate, time period, guarantee, mortgage etc necessary for giving a loan? Explain with an example for each condition.
Answers
Answer:
There are seven factors that affect how much you can borrow:
Your income & commitments: ...
Your lifestyle/living expenses: ...
Credit history: ...
Property deposit: ...
Home loan type, term and interest rate: ...
Assets: ...
Value of the property:
Some conditions are essential for loan :-
(1) Time: To pay the loan on time of returning loan is also fixed while giving the loan only bank fixed the installments and tell the customer about it.
(2) Rate of interest: Rate of interest is fixed for specific amount. Bank before giving the loan to the customer make it clear that what will be rate of interest on the loan amount the customer will pay.
(3) Guarantor: Guarantor is called as supported loan taker. Guarantor gives guarantee if the loan is not repay in time or loan is not payed at all, he (guarantor) will pay the loan amount.
(4) Mortgage: Some fixed deposit, house, property, the person has to keep in the bank against the loan, this is a sort of guarautor only.