CUET Preparation Today
Why might lending institutions insist on additional collateral security? |
To increase the interest rate on the loan To reduce the amount of the loan To protect themselves in case the primary security falls short To make the loan application process faster |
To protect themselves in case the primary security falls short |
The correct answer is option 3- To protect themselves in case the primary security falls short. Lending institutions may insist on additional collateral security for the primary purpose of safeguarding their interests and minimizing risks associated with the loan. Lending institutions want to reduce their exposure to risk. By requiring additional collateral, they ensure that they have more assets to fall back on if the borrower defaults on the loan or if the primary security's value is insufficient to cover the outstanding loan balance. |
