Advertisements
Advertisements
Questions
Explain any three terms of Credit.
Explain the three important 'terms of Credit'.
Solution
Interest rate, collateral and documentation requirement, and the mode of repayment together comprise what is called the terms of credit. The terms of credit vary substantially from one credit arrangement to another. They may vary depending on the nature of the lender and the borrower. The next section will provide examples of the varying terms of credit in different credit arrangements.
- Interest rates: The interest rate is the rate elicited when borrowing and lending loans the interest rate is stated in the document.
- Collateral: It is an asset that the borrower owns, such as a house, shop, or property. It is used to borrow money. It is a guarantee to a lender that the loan will be repaid.
- Documentation required: Before lending money, lenders review all documents related to the borrower's employment history and income.
- Mode of Payment: It is the time frame for repaying the loan. Long-term loans can be repaid in 12 months, 6 months, or monthly instalments via cash, check, or other means.
APPEARS IN
RELATED QUESTIONS
Which one of the following is NOT an informal sector loans for poor rural household in India?
Farmers usually take crop loans at the beginning of the season and repay the loan after ______.
Interest rate, security and documentation requirement, and the mode of repayment together comprise what is called the ______.
Most of the informal lenders charge ______.
The rich households are availing cheap credit from formal lenders whereas the poor households ______.
The difference between what is charged from borrowers and what is paid to depositors is ______.
How do Self Help Groups help borrowers to overcome the problem of lack of collateral? Explain.
Read the information given below and select the correct option.
Rohan has taken a loan of Rs.5 lakhs from the bank to purchase a house at a 12% rate of interest. He has to submit papers about the new house and salary records to the bank. What is this process called?
Assertion (A): Banks are not ready to lend money to certain borrowers.
Reason (R): Some people do not have collateral.
Read the given source and answer the questions that follow:
|
Loans from Cooperatives Besides banks, the other major source of cheap credit in rural areas are the cooperative societies (or cooperatives). Members of a cooperative pool their resources for cooperation in certain areas. There are several types of cooperatives possible such as farmers cooperatives, weavers cooperatives and industrial workers cooperatives, etc. Krishak Cooperative functions in a village not very far away from Sonpur. It has 2300 farmers as members. It accepts deposits from its members. With these deposits as collateral, the Cooperative has obtained a large loan from the bank. These funds are used to provide loans to members. Once these loans are repaid, another round of lending can take place. Krishak Cooperative provides loans for the purchase of agricultural implements, loans for cultivation and agricultural trade, fishery loans, loans for construction of houses and for a variety of other expenses. |
- 'Cooperative society' is an example of which source of 'credit'? (1)
- Explain the contribution of Cooperative Societies in rural development. (1)
- Mention any two sources of capital for Self-Help Groups. (2)
