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Unit 4 Ch 3 : Money and Credit — Social Studies STD 10 — Question

CBSE BoardEnglish MediumSTD 10Social StudiesUnit 4 Ch 3 : Money and Credit3 Marks
Question
Why do lenders ask for ‘collateral’ while lending? Analyse the reasons.
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Answer

Lenders ask for collateral while lending because:
  1. It acts as a security against loans.
  2. Lenders use it as guarantee to lender until the loan is repaid.
  3. If the borrower fails to repay the loan, the lender has the right to sell the asset or collateral to obtain payment.

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