- Collateral reduces the risk for the lender, making them more willing to extend credit. - Common examples of collateral include real estate (for mortgages), vehicles (for car loans), or other valuable assets.
The asset or assets that a borrower pledges in order to guarantee repayment of a loan is called as
Asked in UPSC CDS 1 2021 · Topic: Money & Banking (Financial Markets: Money Market and Capital Market (Components, Instruments, Role))
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