ECONOMICS
CREDIT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Something of value that secures a loan to protect the lender
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Department store charge cards.
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open-ended Credit
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None of the above
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Detailed explanation-1: -Collateral is an item of value pledged to secure a loan. Collateral reduces the risk for lenders. If a borrower defaults on the loan, the lender can seize the collateral and sell it to recoup its losses. Mortgages and car loans are two types of collateralized loans.
Detailed explanation-2: -Collateral is any valuable asset-like a car or a home, for example-that can help borrowers qualify for and secure a loan. Collateral may reduce risk for lenders by ensuring they obtain security for some or all of a loan. Secured loans are a type of loan that requires collateral.
Detailed explanation-3: -Collateral value is the fair market value of an asset used to secure a loan. Your lender will assess the collateral value by comparing it to similar assets sold or by using a professional appraiser. Home appraisals are often conducted to determine the fair market value of a property.
Detailed explanation-4: -A secured loan is a loan backed by collateral. The most common types of secured loans are mortgages and car loans, and in the case of these loans, the collateral is your home or car. But really, collateral can be any kind of financial asset you own.
Detailed explanation-5: -Collateral is an asset or form of physical wealth that the borrower owns like house, livestock, vehicle etc. It is against these assets that the banks provide loans to the borrower. The collateral serves as a security measure for the lender.