Question

Sam would like to use his extensive stamp collection as collateral for a secured loan. Sam has documentation that says his stamp collection is worth $10,525.00. Sam's bank has a policy that permits loan officers to lend no more than 82.5% of the value of the collateral. What is the maximum loan amount Sam can get from his bank using his stamp collection as collateral? Please show answer step by step to make easier to understand.

Answer 1

Answer: $8,683.13

Step-by-step explanation:

In the case of loans, collateral is that item, property or any valuable possession someone in need of a loan gives to his/her lender as a sign of commitment to pay back the loan or possibly forfeit Such valuable if the loan repayment is not met. Mostly, collaterals are often of almost equal value with the amount borrowed or dependent on what is negotiated between the parties involved in the loan.

In this case, The collateral presented is worth $10,525.00 and the bank policy is to loan 82.5% of the value of the Collateral, hence, to know the maximum amount of money Sam can get from his bank, we simply multiply the worth of the collateral by 82.5%. this becomes:

= (82.5/100) × 10,525

= $8,683.13.

This is the maximum loan amount Sam can get from his bank.