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Terms of Credit
- Every loan agreement specifies certain conditions or terms like interest payments , collateral and documentation requirement , and the mode of repayment , they together comprise what is called terms of credit .
Collateral:
-
Collateral
is an
asset
that the
borrower owns
(such as
land
,
building
,
vehicle
,
livestock
, and
deposits with banks
) and uses this as a
guarantee
to a lender until the loan is repaid.
-
If the borrower fails to repay the loan, the
lender
has the right to
sell the asset
or collateral to
obtain payment
.
- In a village there is a variety of credit arrangements for various borrowers:
-
- Money lenders
- Agricultural Trader
- Landowner
- Cooperatives
- Banks
