An asset owned by borrowers and pledged as a guarantee to obtain loan is known as _____ .

rate of interest

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term of credit

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collateral

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Solution

The correct option is A collateral
1:An asset owned by borrowers and pledged as a guarantee to obtain loan is known as collateral.
2:Collateral is a form of security taken from the borrowers of loan by the banks or co-operative societies to lend loans.
3:Collateral is a part of terms of credit of the formal sources of credit.

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Similar questions

Fill in the blanks:

(i) Majority of the credit needs of the __________households are met from informal sources.

(ii) __________costs of borrowing increase the debt-burden.

(iii) __________issues currency notes on behalf of the Central Government.

(iv) Banks charge a higher interest rate on loans than what they offer on __________.

(v) __________is an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender.

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