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

 

Ask a doubt
Davneet Singh's photo - Co-founder, Teachoo

Made by

Davneet Singh

Davneet Singh has done his B.Tech from Indian Institute of Technology, Kanpur. He has been teaching from the past 14 years. He provides courses for Maths, Science, Social Science, Physics, Chemistry, Computer Science at Teachoo.