Why do banks or lenders demand collateral against loans?

Answer :

What is Collateral : Collateral is an asset or property that a borrower offers to a lender to secure a loan. If the borrower fails to repay the loan, the banks has the right to take the collateral and sell it to recover the money.

 

Main Answer : Banks or lenders demand collateral to ensure the security of the loan. If the borrower fails to repay the loan, the lender can sell the collateral to recover the money. It helps reduce the risk of loss for the lender.

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