B.8 Explain the three important "terms of Credit".
Solution-
The three important terms of credits are collateral ,interest rates and documentation requirements .
1. Interests rate- While borrowing or lending loans the interest rates are determined by both the parties and is specified in documentations.
2. Collateral- It is basically an asset that a borrower owns and on the basis of which the loan is granted to him by lender. It can be a house,a vehicle or any land which can be used as collateral.
3. Documentation - Before lending money the lender usually checks the financial credibility of a borrower through various documents like his job papers, or income proofs etc.
The three important terms of credits are collateral ,interest rates and documentation requirements .
1. Interests rate- While borrowing or lending loans the interest rates are determined by both the parties and is specified in documentations.
2. Collateral- It is basically an asset that a borrower owns and on the basis of which the loan is granted to him by lender. It can be a house,a vehicle or any land which can be used as collateral.
3. Documentation - Before lending money the lender usually checks the financial credibility of a borrower through various documents like his job papers, or income proofs etc.