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Single Answer MCQ
Q-00045417

What is a common consequence of a borrower defaulting on a loan?

1

The bank loses all its capital.

2

The borrower will always recover.

3

The bank may seize collateral or enforce penalties.

4

Loans become interest-free.

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Answer and Solution

Answer

C. The bank may seize collateral or enforce penalties.

Solution:

If a borrower defaults on a loan, the bank may take legal action such as seizing collateral provided for the loan or imposing penalties to recover lost funds.

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