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Somak , asked a question
Subject: Social Science , asked on 18/3/14

why do lenders ask for collateral while lending??

Sudeep Singh From Delhi Public School, added an answer, on 21/3/12
84 helpful votes in Social Science
  1. Because they have to keep some sort of security to ensure that their loan is repaid by the borrower. For example, if a lender does not takes collateral, (who knows) the borrower may never return the money. They can run away too. The collateral is a form of security that prevents that problem.
  2. Also, if the borrower is unable to repay the money, the person can sell the collateral to get back his money. He has the full right to do what he wishes if the borrower is unable to repay the loan.

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EXPERT ANSWER

Anubhuti Upadhyay , Meritnation Expert added an answer, on 18/3/14

This conversation is already closed by Expert

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Julia George From Indian School, added an answer, on 7/10/12
37 helpful votes in Social Science

1)Co ll at er al   is an   asse t   th at   the   borr ow er   ow ns   (such   as lan d, building, vehicle, livestock, deposits with banks) and uses this as a guarantee to a lender   until the loan is repaid.

2) .If the borrow er fail s to   repay the loa n, the lend er has the ri ght to sell the asset or collateral to obtain payment. Property such as land titles, deposits with banks, livestock are some common examples of collateral used   for borrowing.

hoppokvm

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Angel From Nalanda Talent School,, added an answer, on 21/3/12
8 helpful votes in Social Science

it is for the reason of security and to ensure repayment of the debt.

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Sneha From Bhavan's Bhagwandas Purohit Vidya Mandir, Civil Lines, added an answer, on 21/3/12
73 helpful votes in Social Science

thnx...!:)

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