The four terms of credit are :

1 Interest rate- The borrower has to pay a sum of money as interest along with the prinicipal amout.

2.Collateral- It is an asset that the borrower owns and uses this as aguarentee to the lender until the loan is repaid.

3. Documentation- Proper documents of borrowing with all the terms and conditions must be submitted.

4. Mode of repayment - The mode through which the borrower will repay the loan must be clearly mentioned.

Terms of Credit

Credit refers to the ability to borrow money or obtain goods and services with the promise of future payment. When entering into a credit agreement, it is important to understand the terms and conditions that govern the borrowing and repayment process. The terms of credit outline the specific details of the agreement, including the amount borrowed, interest rates, repayment period, and any additional fees or charges. It is crucial to review these terms carefully before accepting the credit offer to ensure that it aligns with your financial needs and capabilities.

Key Terms and Conditions of Credit

1. Principal: The principal is the amount of money borrowed or the outstanding balance on the credit account. It is the initial amount that needs to be repaid.

2. Interest Rate: The interest rate is the cost of borrowing money, expressed as a percentage. It is charged on the outstanding balance and determines the additional amount to be paid back over the repayment period.

3. Repayment Period: The repayment period refers to the time given to repay the borrowed amount. It can vary based on the type of credit, ranging from a few months to several years.

4. Minimum Monthly Payment: The minimum monthly payment is the smallest amount that must be paid each month to keep the credit account in good standing. It typically includes a portion of the principal and the interest accrued.

5. Grace Period: The grace period is the time given before interest starts accumulating on new purchases or cash advances made using the credit account. It allows the borrower to avoid interest charges if the full amount is repaid within this period.

6. Annual Percentage Rate (APR): The annual percentage rate is the total cost of borrowing over a year, expressed as a percentage. It includes the interest rate, fees, and charges associated with the credit.

7. Fees and Charges: Credit agreements may include various fees and charges, such as annual fees, late payment fees, cash advance fees, and balance transfer fees. These should be considered when assessing the overall cost of credit.

8. Collateral: Some types of credit, such as secured loans, require collateral. Collateral is an asset (e.g., property, car) that the borrower pledges to the lender as security for the loan. If the borrower fails to repay the loan, the lender can seize and sell the collateral to recover the outstanding balance.

9. Credit Limit: The credit limit is the maximum amount that can be borrowed or charged on a credit account. It is determined by the lender based on the borrower's creditworthiness and financial situation.

10. Penalties and Consequences: Failure to adhere to the terms of credit can result in penalties and consequences. These can include late payment fees, increased interest rates, negative impact on credit scores, and even legal action in extreme cases.

Understanding and carefully considering the terms of credit is essential for responsible borrowing and financial management. It allows individuals to make informed decisions, compare different credit offers, and ensure they can meet their repayment obligations without facing undue financial stress.