Choose the given statement as true/false:

Credit is an arrangement between the borrower and the creditor.

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Detailed Solution

The above statement is true.
Credit is an arrangement whereby the lender grants the borrower access to funds, goods, or services in exchange for a promise to make future payments. Every loan agreement has a different interest rate. The lenders also require security in the form of collateral. Collateral is a term used to describe the borrower's asset (such as a piece of land, a building, a car, a bank account, or animals) as security for a loan. Until the borrower pays the loan, the collateral is utilised as a pledge to the lender. If the borrower cannot repay the loan, the lender can sell the asset or collateral to recover the money owed.

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