Question

What is meant by collateral?? ​

Answer 1

Explanation:

Collateral is an asset pledged by a borrower to a lender, usually in return for a loan. The lender has the right to seize the collateral if the borrower defaults on the obligation.

Answer 2

$\huge\mathbf\green{Answer}$

Collateral:

• It is like a security against loans that is demanded by the lenders in against to the interest.

• It can also be termed as an asset owned by the borrower like land, jewel, building, etc.; which is used as a guarantee until the loan is repaid.

• If the borrower is not able to repay the loan, the lender has the right to sell the asset owned by the borrower to attain the money back.

Importance :-

The interest rate, mode of repayment, collateral and the documentations are together called as terms of credit.