Answer:
(i)
Every loan agreement specifies an interest rate which the borrower must ' pay
to the lender along with repayment of the principal.
(ii) In addition, lender may demand collateral i.e. an asset that the
borrower owns and uses this as a guarantee until the loan is repaid.
(iii) If the borrower fails to repay the loan, the lender
has the right to sell the collateral to obtain payment.
(iv) Terms of credit comprise interest rate, collateral
and documentation requirement, and the mode of repayment.
(v) 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.
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