Terms of Credit include interest rate, collateral and documentation requirements and the mode of repayment. The terms of credit may vary depending on the nature of the lender and the borrower.
Every loan agreement specifies an interest rate which the borrower must pay to the lender along with the repayment of the principal.
Lender may also demand collateral (security) against loans. Collateral is an asset that the borrower owns (such as land, building, vehicles, livestock etc.) and uses this as a guarantee to the lender until the loan is repaid.
