Debtor who agrees to give the creditor a security interest in a valuable object, called collateral.
Simply said, collateral is an asset — like a auto or house — that a borrower pledges in exchange for blessing for a certain loan. Since collateral safeguards the lender's fiscal interest in the event that the borrower eventually is unfit to repay the loan in full, they may feel more at ease issuing credit.
Banks must use collateral to lower their threat. A bank may conclude to seize possession of the collateral that was promised to them in the agreements you inked when you applied for the loan if the company is unfit to repay the debt.
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