Question

Why do banks ask for collateral while giving loans . Give short 3 - 5 points . It is URGENT ...pls pls...

Answer 1

Bank ask for collateral while giving credit to borrower because

⭕if the borrower fails to repay the loan the bank has right to use or sell the collateral given to him by the borrower so that they can get money which they gave him as a loan

⭕so that there is a guarantee of repayment.

⭕so that force could be made on borrowers for repayment

⭕in the case of non-repayment , banks can sell the collateral to get their credit back

Answer 2

1. So that people won’t runaway with the loan.

2. So that they are bound to repay the loan.

3. So that banks have an asset of the borrower