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An asset that the borrower uses as a repayment guarantee to a lender is termed as a :
- a)deposit
- b)collateral
- c)advance
- d)all the above
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
An asset that the borrower uses as a repayment guarantee to a lender i...
Collateral
Collateral is an asset that a borrower offers to a lender as a form of security for a loan. It serves as a guarantee that the lender will be able to recoup the loan amount in case the borrower fails to repay.
Importance of Collateral
- Collateral provides a sense of security to the lender, reducing the risk associated with lending money.
- It allows borrowers to access loans at lower interest rates or with more favorable terms than they would without collateral.
- The value of the collateral is assessed by the lender to determine the maximum loan amount that can be provided.
Types of Collateral
- Real estate (such as a house or land)
- Vehicles (such as cars, trucks, or motorcycles)
- Investments (such as stocks, bonds, or mutual funds)
- Equipment (such as machinery or tools)
- Inventory (such as goods or products)
Benefits for Borrowers
- Collateral can help borrowers qualify for larger loan amounts or better interest rates.
- It can provide access to financing options that may not be available otherwise.
- Repaying a loan with collateral can help build or improve the borrower's credit score.
Risks for Borrowers
- If the borrower fails to repay the loan, they risk losing the collateral to the lender.
- Defaulting on a loan can have long-term negative effects on the borrower's credit history.
- Borrowers should carefully consider the terms and conditions of the loan agreement before using collateral.
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An asset that the borrower uses as a repayment guarantee to a lender is termed as a :a)depositb)collateralc)advanced)all the aboveCorrect answer is option 'B'. Can you explain this answer? for Class 10 2025 is part of Class 10 preparation. The Question and answers have been prepared according to the Class 10 exam syllabus. Information about An asset that the borrower uses as a repayment guarantee to a lender is termed as a :a)depositb)collateralc)advanced)all the aboveCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for Class 10 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for An asset that the borrower uses as a repayment guarantee to a lender is termed as a :a)depositb)collateralc)advanced)all the aboveCorrect answer is option 'B'. Can you explain this answer?.
An asset that the borrower uses as a repayment guarantee to a lender is termed as a :a)depositb)collateralc)advanced)all the aboveCorrect answer is option 'B'. Can you explain this answer? for Class 10 2025 is part of Class 10 preparation. The Question and answers have been prepared according to the Class 10 exam syllabus. Information about An asset that the borrower uses as a repayment guarantee to a lender is termed as a :a)depositb)collateralc)advanced)all the aboveCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for Class 10 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for An asset that the borrower uses as a repayment guarantee to a lender is termed as a :a)depositb)collateralc)advanced)all the aboveCorrect answer is option 'B'. Can you explain this answer?.
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