ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -What is “Collateral”? Collateral is an asset of some sort that a borrower pledges as a guarantee of repayment of a debt or loan. Should the borrower default on the agreed repayments, the lender would have the right to take possession of the pledged asset, known as collateral.

Detailed explanation-2: -Pledged collateral refers to assets that are used to secure a loan. The borrower pledges assets or property to the lender to guarantee or secure the loan.

Detailed explanation-3: -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-4: -Residential property It is the most common property type that lenders accept as collateral for a loan against property. You can pledge any residential property as security to avail a loan.