Every loan agreement specifies an interest rate which the borrower must pay to
the lender along with the repayment of the principal.
(ii) In addition, lenders may demand a collateral or an asset that the borrower
owns to use it as a guarantee until he repays the loan.
(iii) Interest rate, collateral and documentation
requirement and the mode of repayment are the terms of credit required for
formal or informal sectors for loans.
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