Terms of Credit
- A loan agreement specifies an interest rate by which the borrower must pay the lender along with the repayment of the principal. Also, the lenders demand collateral (security) against loans.
- Collateral (security) is actually an asset that the borrower owns (like land or a building or a vehicle, livestock, or deposits with banks) which is used as a guarantee to a lender until the loan is repaid. In case the borrower fails to repay the loan, the lender as per his/her right can sell the asset or collateral to obtain payment.
- Terms of credit: Interest rate, collateral & documentation requirement & the mode of repayment, together. It varies, depending on the nature of the lender & the borrower.
CBSE Notes Class 10 Economics Chapter 3: Money and Credit
In the chapter, CBSE Notes Economics Chapter 3: Money and Credit, we will learn about the modern forms of money and also how they are connected with the banking system. In the latter part of the article, we will know about the credit system and how it impacts the borrowers, depending upon the situation, and also go through these notes for the understanding of the topics in detail.