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Q.

Mention if the given statement is true or false:

Collateral is an asset used as security against loan.

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a

True

b

False

answer is A.

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Detailed Solution

Collateral is the borrower's asset, such as land, or building, which acts as a security for the lender against the loans. If the borrower fails to repay the loans, the lender has the right to take collateral possessions and sell them to recover the payment for the loan amount. Essential assets are taken as collateral so that in case of failure in payment of the loan amount by the borrower, the lender can sell off the assets to substantially recover the loan amount in case of a payment default. Most of the loans taken from banks require collateral.

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Mention if the given statement is true or false:Collateral is an asset used as security against loan.