Why do lenders ask for'collateral'while lending ? Analyse the reasons.

1.	Why do lenders ask for'collateral'while lending ? Analyse the reasons.
Answer» Lenders ask for collateral while lending because : (i) It acts as a security against loans. (ii) Lenders use it as guarantee until the loan is repaid. (iii) If the borrower fails to repay the loan, the lender has the right to sell the asset or collateral to obtain payment.

Answer»

Lenders ask for collateral while lending because :

(i) It acts as a security against loans.

(ii) Lenders use it as guarantee until the loan is repaid.

(iii) If the borrower fails to repay the loan, the lender has the right to sell the asset or collateral to obtain payment.

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Why do lenders ask for'collateral'while lending ? Analyse the reasons.

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