Question

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✋Need One word answer :)
Why do banks ask for collateral while giving loans ?​

Answer 1

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⚫Banks use collateral as a guarantee until the loan is repaid.⚫

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Answer 2

Answer:

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Banks want their money to be secure and safe - and returned to them at the end of the loan period.

When a person with no credit history or insufficient income comes asking for the loan, a bank still wants to make money, but with no value given to the promise to repay, the bank will insist on a collateral (something of value that bank can hold on to or sell if the borrower defaults on repayments).

⇒ there are no rules on questions that lenders can’t ask of borrowers.

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