Which of the following statements regarding loan terminology is true?
A)Loan covenants are the collateral provided by a borrower to a lender as security on a loan.
B)A secured loan means that the borrower has a pre-approved line of credit backing the debt.
C)Lenders can revise loan terms if a borrower violates a loan covenant.
D)All companies are able to establish lines of credit which will allow them to borrow money as needed,up to a prearranged limit.

Question

Quizplus · Accepted Answer

Loan covenants are terms and conditions set by lenders as part of the loan agreement. If a borrower violates a loan covenant, the lender may revise the loan terms or even demand immediate repayment. The other statements are not true. Collateral is something pledged as security on a loan, a pre-approved line of credit is not the same as a secured loan, and not all companies are able to establish lines of credit.

Which of the Following Statements Regarding Loan Terminology Is True