Terms of Credit

Q. Which of the following are included in terms of credit?

1. Principal amount
2. Duration of loan
3. Reserve amount
4. Interest rate

Q. What do you call an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender?

1. Collateral
2. Interest
3. Reserve
4. Deposit

Q. Why are high interest rates on loans harmful?

1. High interest rates mean high instalments
2. High interest rates mean high profit for banks
3. High interest rates mean encouragement for banks
4. High interest rates mean costilier loans

Q. The interest rate, collateral documentation requirements, and the mode of repayment are known as ____________.

1. Credit creation
2. Terms of credit
3. Source of credit
4. Demand deposits

Q. Interest rate, collateral documentation requirements, and mode of repayment are known as terms of credit.

1. False
2. True

Q. What happens to the collateral if the borower is not able to pay the loan amount?

1. The lender takes over the collateral
2. The borrower takes over the collateral
3. The collateral is liquidated
4. The collateral gets changed

Q. At the time of taking a loan, the borrower always looks for easy terms of credit. What does the phrase 'terms of credit' refer to?

(i) Principal amount
(ii) Rate of interest
(iii) Location of the bank

1. Only (i)
2. Only (ii)
3. Only (iii)
4. Both (i) and (ii)

Q. A loan is usually given for a specific duration of time and needs to be completely repaid by a specified date. The borrower repays the loan in cash, by cheque or by card in instalments, or as a one-time repayment, as specified in the mode of repayment. What are these specifics called?

1. Collateral
2. Rules
3. Methods
4. Terms of credit

Q. Match the following with the best suited option.

1. Term of credit
2. Earnings of the bank
3. Fraction of deposit