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Question
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?
Options
Interest Rate
Collateral
Principal Amount
Instalments
Solution
Collateral
Explanation:
Collateral is an asset that the borrower owns (such as land, building, vehicle, livestock, and deposits with banks) and uses this as a guarantee to a lender until the loan is repaid.
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A House Loan Megha has taken a loan of 75 lakhs from the bank to purchase a house. The annual interest rate on the loan is 12 percent and the loan is to be repaid in 10 years in monthly instalments. Megha had to submit to the bank, documents showing her employment records and salary before the bank agreed to give her the loan. The bank retained as collateral the papers of the new house, which will be returned to Megha only when she repays the entire loan with interest. |
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Reason (R): Some people do not have collateral.
Read the given source and answer the questions that follow:
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- '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)
