Terms of credit is the list of requirements need to be satisfied for any credit arrangements.
It includes interest rate, collateral, documentation and mode of repayment.
- Interest rate- While borrowing or lending money as loan, there is a reward given to the lender for lending his money to borrower. The reward money is calculated with a fixed rate (%).
- Collateral- Collateral can be any asset owned by borrower like land, house, shop, etc. The borrower offer his assest which act as a guarantor for loan repayment.
- Documentation- Proper documents of borrowing with all the terms and conditions must be submitted. The lender check all the documents (employment record and income proof) before lending money.
- Mode of repayment- The mode through which the borrower will repay the loan must be clearly mentioned. Long term loans can be repaid in annual, six monthly or monthly installments.