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Single Answer MCQ
Q-00015881

What role does collateral play in credit agreements?

1

It secures the loan for the lender

2

It guarantees a profit for the borrower

3

It reduces the interest rate

4

It eliminates the need for repayment

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Sandeep Chaturvedi

Sandeep Chaturvedi

CBSE Social Science & Humanities Reviewer

Social science and humanities educator with 14+ years of experience reviewing CBSE SST, economics, commerce, arts, and vocational content.

M.A. HistoryM.A. Political ScienceB.Ed.

Answer and Solution

Answer

A. It secures the loan for the lender

Solution:

Collateral acts as security for the lender in case the borrower defaults, making option A correct. The other options are inaccurate descriptions of collateral.

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