1.

The asset or assets that a borrower pledges in order to guarantee repayment of a loan is called as1. Cheque2. Collateral3. Guarantee card4. Bond

Answer» Correct Answer - Option 2 : Collateral

The correct answer is Collateral.

  • Collateral is an asset or property that an individual or entity offers to a lender as security for a loan.
  • It is used as a way to obtain a loan, acting as a protection against potential loss for the lender should the borrower default.

  • Collateral minimizes 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.
  • A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan.


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