10th Class Social Science Solved Paper - Social Science-2017 Delhi Set-III

  • question_answer 6) Why do lenders ask for ?collateral? while lending? Analyse the reasons.

    Answer:

    Lenders ask for collateral while lending to borrowers because:
    (i) Lenders demand collateral (security) against loans. A Collateral is an asset that the borrowers owns (such as-land, building, vehicles, livestocks, deposits with bank).
    (ii) Lenders use the collateral as a guarantee until the loan (with interest if applicable) is repaid.
    (iii) If the borrower fails to repay the loan, the lender has right to sell the asset or collateral to obtain repayment.


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