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Analyze the information given below, considering one of the following correct options:
Rita has taken a loan of ` 7 lakhs from the bank to purchase a car. The annual interest rate on the loan is 14.5 per cent and the loan is to be repaid in 3 years in monthly instalments. The bank retained the papers of the new car as collateral, which will be returned to Rita only when she repays the entire loan with interest.
(A) Mode of re-payment
(B) Terms of credit
(C) Interest on loan
(D) Deposit criteria
Answer:
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So, the correct answer is (B) - terms of credit.
Explanation
Let’s check the meaning of all the options
- (A) Mode of re-payment of loan is how the borrower will re-paying the loan like cash etc.
- (B) Terms of credit are the terms and conditions of the loan that includes all the details like interest rate , collateral etc. on which the borrower and the lender like bank agree on.
- (C) Interest on a loan is the extra amount that the borrower pays to the lender as interest.
- (D) Deposit criteria are the standards or benchmarks that the borrower had to meet.
Since bank has retained the papers of the new car of Rita so it is included in the terms of credit. So, the correct answer is (B) - terms of credit.
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