Credit gives the word to pay either by repaying it or returning those resources later. In other words, this credit is the method of making the reciprocity formal, legally enforceable, and of course, extensible to a vast group of people who are not related.
However, the resources provided may be financial or have goods or services, like consumer credit. The credit covers any form of deferred payment. Credit generally gets extended by the creditor, the debtor or lender, and sometimes the borrower.
A firm commitment means the promise given by any lender for entering into any loan agreement with the borrower within a specific duration. The firm commitment is also applicable for the reporting and accounting of derivatives which are useful for hedging. The firm commitment usually indicates the agreement of an underwriter for the assumption of all inventory-based risks. The firm commitment also indicates the agreement for buying all the securities for any IPO directly for public sale from the issuers. Firm commitment may also be applicable for derivatives and loans. In this scenario, the lender offers a firm commitment or promise to the borrowers that the loan amount will be made available for the borrowing purpose, whenever needed.
Firm commitment is often applicable in the home loan and mortgage sector, where the lender may state that there is a firm promise or commitment given to the borrowers that the amount will be provided whenever it is required. It also means that a guarantee of the loan is given within a fixed duration by the lender.
