Home Preparation for National Talent Search Examination (NTSE)/ Olympiad
Chapter : 3. Money and Credit
Terms Of Credit
Terms Of Credit Interest Rate : Every loan agreement specifies an interest rate which the borrower must pay to the bank along with the repayment of the principal amount. There are two types of interest rate : (a) Fixed : This rate is fixed and do not change throughout the loan period. (b) Floating : This rate vary according to the bank’s policy and policy of the R.B.I. Debt trap : It is a situation which pushes the borrower into a situation from which recovery is very painful. Collateral : It is an asset that the borrower owns (such as lands, building, vehicles, livestocks, deposits with bank) and uses this as a guarantee to a lender until the loan is repaid. If the borrower fails to repay the loan, the lender has the right to sell the collateral to obtain payment.