Question

What is collateral? Why do lenders ask for collateral while lending? Explain.
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Answer 1

Answer:

Explanation:

Lenders ask for collateral as security against loans. If the borrower fails to repay the loan, the lender has the right to sell the asset-or collateral to recover the payment.  

Collateral assets (such as land, vehicle, etc.) act as a security for the lenders in case the borrower defaults on repayment of the loan. It is for this reason that lenders ask for collateral while lending

Answer 2

is an asset, such as land ,vehicle, building and livestock that a borrower owns and uses

this as a guarantee to a lender until the loan is repaid.