A loan commitment is
A)a promise by the borrower to obtain a loan from a particular bank of his choice
B)a promise by the bank to lend in the future on a prespecified term.
C)an agreement that entitles the bank to change the interest rate on loan based on the prevailing market condition
D)the same as spot lending
E)all of the above

Question

Quizplus · Accepted Answer

A loan commitment is a promise by the bank to lend in the future on a prespecified term. It is not a promise by the borrower to obtain a loan from a particular bank of his choice, nor does it give the bank the right to change the interest rate on the loan based on prevailing market conditions. Spot lending refers to the immediate provision of a loan, without any prior commitments or agreements.

A Loan Commitment Is