A House Loan Megha has taken a loan of Rs lakhs from the bank to purchase a house. The annual interest rate on the loan is per cent and the loan is to be repaid in 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.
Fill the following details of Megha’s housing loan. Interest rate, collateral and documentation requirement, and the mode of repayment together comprise what is called the terms of credit . The terms of credit vary substantially from one credit arrangement to another. They may vary depending on the nature of the lender and the borrower.
The next section will provide examples of the varying terms of credit in different credit arrangements. . Why do lenders ask for collateral while lending? .
Given that a large number of people in our country are poor, does it in any way affect their capacity to borrow? . Fill in the blanks choosing the correct option from the brackets. While taking a loan, borrowers look for easy terms of credit.
This means (low/high) interest rate, (easy/ tough) conditions for repayment, (less/more) collateral and documentation requirements. Loan amount (in Rupees) Duration of loan Documents required Interest rate Mode of repayment Collateral SSSSShyamal tells us that every season he needs loans for cultivation on his . acres of land. Till a few years back, he would borrow money from the village moneylender at an interest rate of five per cent per month ( % per annum).
For the last few years, Shyamal has been borrowing from an agricultural trader in the village at an interest rate of three per cent per month. At the beginning of the cropping season, the trader supplies the farm inputs on credit, which is to be repaid when the crops are ready for harvest. Besides the interest charge on the loan, the trader also makes the farmers promise to sell the crop to him. This way the trader can ensure that the money is repaid promptly.
Also, since the crop prices are low after the harvest, the trader is able to make a profit from buying the crop at a low price from the farmers and then selling it later when the price has risen.