Why do lenders ask for collateral while lending?

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Chapter 3 NCERT Class 10 Economics SOLUTIONS

3. Why do lenders ask for collateral while lending?

Question:

Why do lenders ask for collateral while lending?

Answer:

At the time of lending, the lender asks for collateral or (guarantee) as security in return for the loan. He does this because in case the borrower fails to return the loan, the lender has the right to sell the collateral to get the payment.

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(All Q's of this Chapter solved)

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The following table shows people in a variety of occupations in urban areas. What are the purposes for which the following people might need loans? Fill in the column.

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What is the basic idea behind the SHGs for the poor? Explain in your own words.

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Why do you think that the share of formal sector credit is higher for the richer households compared to the poorer households?

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