What are Terms of Credit? Explain in simple words.

Interest rate, collateral and documentation requirement and the mode of repayment together comprise are the terms of credit.

Explanation:

(1) Interest rate= While borrowing or lending loans, rate of interest is decided by both the parties and a document is specified.

(2)Collateral= It is an asset that borrower owns like a house, shop etc. It is against such assets as a guarantee that loan is given to a borrower.

(3)Documentation required=The borrower before lending money check all the documents related to the employment record and income that is earned by the borrower.

(4)Mode of payment=It is related to the ways and duration in which the loan can be repaid by the borrower.

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