Why do lenders ask for ‘collateral' while lending ? analyse the reasons?
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Lenders ask for collateral while lending because if payment of interest and repayment of the principal are not made on time, the lenders can sell the collateral assest and recover their money.
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ʟᴇɴᴅᴇʀs ᴀsᴋ ᴄᴏʟʟᴀᴛᴇʀᴀʟ ғʀᴏᴍ ᴛʜᴇ ʙᴏʀʀᴏᴡᴇʀ ᴀɴᴅ ᴜsᴇs ɪᴛ ᴀs ᴀ ɢᴜʀᴇɴᴛᴇᴇ ᴏʀ ᴘʀᴏᴍɪsᴇ ғʀᴏᴍ ᴛʜᴇ ʙᴏʀʀᴏᴡᴇʀ ᴛᴏ ᴘᴀʏ ᴛʜᴇ ʟᴏᴀɴ ɪɴ ᴛʜᴇ ғᴜᴛᴜʀᴇ ᴀɴᴅ ɪғ ᴛʜᴇ ʙᴏʀʀᴏᴡᴇʀ ғᴀɪʟs ᴛᴏ ʀᴇᴘᴀʏ ᴛʜᴇ ʟᴏᴀɴ ᴛʜᴇɴ ᴛʜᴇʏ ʜᴀᴅ ʟᴇɢᴀʟ ʀɪɢʜᴛs ᴛᴏ sᴇʟʟ ᴛʜᴇ ᴀssᴇᴛ ᴀɴᴅ ᴏʙᴛᴀɪɴ ᴍᴏɴᴇʏ.
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