Question

Why does a bank want collateral​

Answer 1

The bank wants to give you an incentive to pay back the loan. If they did not hold your assets as collateral, you could simply fail to pay back the loan and really not lose anything other than your credit score. Many borrowers already have tarnished credit scores, so that is rarely enough incentive to base a loan on.

I would put this into your own words considering I copied and pasted it. Other than that I hope this helps!

Answer 2

A secured loan is a loan that has collateral attached to it. This type ofloan generally has a lower interest rate because the bank is taking a lower risk because it can collect the collateral if you default on payments. A securedloan is a good way to build credit.