A loan commitment is an agreement between a bank and a borrower where the bank agrees to extend credit under certain conditions, rather than an irrevocable promise to do so. It is not a form of a standby letter of credit, which is a guarantee of payment issued by a bank on behalf of a client.

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A Loan Commitment Is

Question 36

Multiple Choice

A loan commitment is

A) an irrevocable promise by the bank to a borrower to extend credit
B) an agreement between a bank and a borrower that the bank may extend credit under certain conditions
C) a form of a standby letter of credit
D) none of the above

Correct Answer: