Explain the term collateral what right does the lender has if the
borrower fails to repay the loan amount ?
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The collateral serves as a lender's protection against a borrower's default and so can be used to offset the loan if the borrower fails to pay the principal and interest satisfactorily under the terms of the lending agreement.
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DEFINITION of 'Collateral' Collateral is a property or other asset that a borrower offers as a way for a lender to secure the loan. If the borrower stops making the promised loanpayments, the lender can seize thecollateral to recoup its losses. ... A lender's claim to a borrower'scollateral is called a lien.
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