Economics
Answer
Lenders ask for collateral because it serves as a guarantee that they can recover their money in case the borrower defaults on the loan. Collateral is an asset that the borrower owns (such as land, building, vehicle, livestocks, deposits with banks) and uses this as a guarantee to a lender until the loan is repaid. If the borrower fails to repay the loan, the lender has the right to sell the asset or collateral to obtain payment.
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