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s2008m [1.1K]
2 years ago
5

Two reasons why collateral is important to a borrower

Business
1 answer:
Mumz [18]2 years ago
7 0

The reasons why collateral is important to a borrower are:

  • It serves as borrower's credit worthiness .
  • Collateral minimizes the risk for lenders.

<h3>What is Collateral?</h3>

Collateral  can be regarded as item of value that is been used to secure a loan.

In a case whereby  a borrower defaults on the loan,it is possible for lender to seize the collateral and sell it to recoup its losses. Banks require collateral on certain types of loans.

Learn more about Collateral at;

brainly.com/question/14037774

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