A provision of a contractual obligation that is designed to protect the interest of lenders is called
A)a lenders' security provision
B)a restrictive covenant.
C)a non-interest-bearing obligation.
D)collateral.

Question

Quizplus · Accepted Answer

A restrictive covenant is a provision in a contract that limits or prevents certain actions by one of the parties. In the context of lending, a restrictive covenant is often included in loan agreements to protect the lender's interests by placing limitations on the borrower's activities that could affect the ability to repay the loan. Examples of restrictive covenants in loan agreements might include limitations on the amount of debt the borrower can incur or restrictions on investments the borrower can make.

A Provision of a Contractual Obligation That Is Designed to Protect