Interest rate, collateral and documentation requirement, and the mode of repayment together comprise what is called the terms of credit.
The four terms of credit are-
1. Interest rates- The interest rate is the rate that is decided while borrowing and lending loans, interest rate is mentioned in the document.
2. Collateral- It is an asset that the borrower owns like a house, shop, property, etc. It is used to take loans.
3. Documentation required- The borrowers before lending money check all the documents related to the employment record and income earned by the borrower.
4. Mode of payment- It is the duration in which the loan is to be repaid. long term loans can be repaid in 12 months, 6 months, or monthly installments.