Question

If a borrower provides collateral and fails to repay the loan,

A) the borrower may cancel the loan to get the collateral.
B) the lender can sell the collateral to cover losses.
C) the borrower must buy the collateral back.
D) the lender keeps the collateral in case of late payment.

Answer 1

If a borrower provides collateral and fails to repay the loan, then (B) The lender can sell the collateral to cover losses.

Step-by-step explanation:

Because of a gold credit, if the borrower neglects to reimburse the advance, the bank has the full position of selling the collateral and recuperates their cash. When the cost of gold is, more the cash left in the wake of taking the extraordinary sum will come back to the borrower.

Therefore, this is a significant drawback to defaulting on protected loans. When this occurs, the advantages you set up for guarantee when getting a verified credit can be repossessed right away. In numerous U.S. states, banks are not constrained to tell borrowers that their insurance resources have been seized and auctions off to a buyer.

Answer 2

The correct option is B.
In case of non repayment of loan, the lender can sell the collateral and used the proceeds to cover his losses. A collateral is always in form of properties which are substantial in value, it is often requested that borrowers provide collateral in order to reassure lenders that they will pay up.