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Unit 4 Ch 3 : Money and Credit — Social Studies STD 10 — Question

CBSE BoardEnglish MediumSTD 10Social StudiesUnit 4 Ch 3 : Money and Credit5 Marks
Question
What are the terms of credit?
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Answer

  1. Every loan agreement specifies an interest rate which the borrower must pay to the lender along with repayment of the principal.
  2. In addition, lender may demand collateral, i.e., an asset that the borrower owns and uses this as a guarantee until the loan is repaid.
  3. If the borrower fails to repay the loan, the lender has the right to sell the collateral to obtain payment.
  4. Terms of credit comprise interest rate, collateral and documentation requirement, and the mode of repayment.
  5. The terms of credit vary substantially from one credit arrangement to another. They may vary depending on the nature of the lender and the borrower.

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