Question

You are a bank manager. Ravi wants a loan from your bank to purchase a car with which he can start his taxi service’. Write down the terms of credit for this loan.

Answer 1

Answer:

The following are the four terms of credit:

i) Interest Rate- It is the amount paid along with the principal sum that is borrowed.

ii) Collateral- It is the security advanced to the lender by the borrower to obtain credit. Defaulting on loan payments leads to confiscation of collateral by the lender.

iii) Documentation Requirement- It is the documentation of the details of transactions of credit.

iv) Mode of repayment- It is the form in which repayment is to be made. It includes details like cheque or cash, number of instalments, etc.....