ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -In its essence, the loan market is a market mechanism of interaction of economic entities, which alternately act as creditors, then as borrowers. The mortgage loan as a form of lending to individuals, based on the analysis of the prospects of development of credit mechanisms and preferences of borrowers.

Detailed explanation-2: -Cash credit loan allows businesses to borrow amounts from their bank account over and above their account balance, as many times as they want, up to the pre-specified borrowing limit. However, the interest is only charged on the amount borrowed and not on the entire borrowing (credit) limit.

Detailed explanation-3: -Bank credit, therefore, is the total amount of money a person or business can borrow from a bank or other financial institution. A borrower’s bank credit depends on their ability to repay any loans and the total amount of credit available to lend by the banking institution.

Detailed explanation-4: -A loan is a non-revolving credit product, so it can’t be used like a credit card. Because it is a lump sum for one-time use, the credit advanced can’t be used over and over again.