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Loan Commitments Overview

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Questions and Answers

What term describes a lender's promise to issue a permanent loan when requested by the borrower?

backup loan commitment
interim loan commitment
standby loan commitment (correct)
incremental loan commitment

Which of the following is NOT a type of loan commitment?

interim loan commitment
advancement loan commitment (correct)
backup loan commitment
standby loan commitment

What is the main feature of a standby loan commitment?

It allows multiple lenders to participate
Interest rates are fixed
The borrower can access the loan at any time (correct)
It is a temporary financial solution

Which type of loan commitment is typically used for short-term financing needs?

<p>interim loan commitment (B)</p> Signup and view all the answers

What distinguishes a backup loan commitment from a standby loan commitment?

<p>Backup loan commitments are secondary options for funding. (A)</p> Signup and view all the answers

Flashcards

Standby Loan Commitment

A commitment from a lender to provide a long-term loan upon request by the borrower.

Incremental Loan Commitment

A loan commitment that guarantees a specific loan amount, but allows for the possibility of increasing the loan amount later.

Interim Loan Commitment

A type of loan agreement that provides a temporary loan until a longer-term loan is secured.

Contingent Loan Commitment

A commitment from a lender to provide a loan if a specific event occurs.

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Loan Commitment

A loan commitment that provides financial security to borrowers, ensuring access to funding when needed.

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Study Notes