Collateral
| Collateral is an asset that acts as a security to ensure that borrowers repay their loans to lenders. Collateral can be in the form of property, such as a house or a car, or it can be in the form of cash. If a borrower defaults on their loan, the lender can seize the collateral and sell it to repay the loan. Collateral is an important part of the lending process because it protects the lender from losses if the borrower does not repay the loan. Lenders typically require collateral when they are lending to borrowers with bad credit or when the loan amount is large. If you are thinking of taking out a loan, make sure you understand the requirements for collateral. You don't want to put up your home as collateral for a loan that you can't afford to repay. |
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