Question

What are some ways that someone looking for a loan might reassure a bank that is faced with imperfect information about whether the borrower will repay the loan?

a. Providing collateral or a co-signer
b. Showing no financial records
c. Keeping personal information confidential
d. Requesting a higher loan amount

Answer 1

Ways to reassure a bank about loan repayment include providing collateral or a co-signer, showing financial records, and maintaining privacy of personal information.

Step-by-step explanation:

When someone is looking for a loan and wants to reassure a bank that is faced with imperfect information about whether the borrower will repay the loan, there are several ways to do so:

1. Providing collateral or a co-signer: By offering collateral, such as property or equipment, the borrower gives the bank a right to seize and sell the assets if the loan is not repaid. Alternatively, having a co-signer who legally pledges to repay the loan if the borrower fails to do so provides additional reassurance to the bank.
2. Showing financial records: Providing the bank with accurate and comprehensive financial records helps establish the borrower's creditworthiness and ability to repay the loan.
3. Maintaining privacy of personal information: While this does not directly reassure the bank about repayment, it helps protect the borrower's identity and prevent identity theft.