What is Collateral ? Why do lenders ask for collateral while lending money.???
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If the borrower get fails to make loan amount back, then lender have full right to sell the asset or collateral to meet payment and reduce of exposure in to run the business with other.
Possibility to meet regulatory capital saving by the transferring as well as the pledging the eligible assets to user.
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Collateral:- In lending agreements, collateral is a borrower's pledge of specific property to a lender, to secure repayment of a loan.
Lenders ask for collateral while lending because if payment of interest and repayment of the principal are not made on time, as the last resort the lenders can sell the collateral assets and recover their money.
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