Explain the importance of collateral on loans
Answers
Answer:
Explanation:
Definition of Collateral. Collateral refers to assets or personal property that you use to secure a loan.
If the borrower defaults on a loan secured with collateral, the lender can seize his property to repay the debt. However, lenders of unsecured loans must obtain a judgment before they can seize property.
A loan secured with collateral is a better investment for the lender because borrowers don't want to lose their pledged property, so they are less likely to default on the loan.
If you have bad credit or limited income, lenders may be more willing to approve your application if you agree to pledge collateral.
Answer:
Here is the explanation!
Explanation:
The term collateral refers to an asset that a lender accepts as security for a loan. Collateral may take the form of real estate or other kinds of assets, depending on the purpose of the loan. The collateral acts as a form of protection for the lender. That is, if the borrower defaults on their loan payments, the lender can seize the collateral and sell it to recoup some or all of its losses. Collateral is an item of value used to secure a loan. Collateral minimizes the risk for lenders. If a borrower defaults on the loan, the lender can seize the collateral and sell it to recoup its losses. Mortgages and car loans are two types of collateralized loans. Other personal assets, such as a savings or investment account, can be used to secure a collateralized personal loan.