Final answer:
Hiring companies hire loan signers to mitigate the risk of lending money. Banks require a cosigner or collateral to assure that the loan will be repaid.
Step-by-step explanation:
In the financial capital market, before a bank makes a loan, it requires a prospective borrower to fill out forms regarding income sources. The bank also conducts a credit check on the individual's past borrowing. One approach that banks use to mitigate the risk of lending is requiring a cosigner, who legally pledges to repay some or all of the money if the original borrower does not. This provides the bank with an extra layer of assurance that the loan will be repaid.
Another approach is to require collateral, such as property or equipment, which the bank can seize and sell if the borrower defaults on the loan. Collateral gives the bank a tangible asset that can be used to recoup any losses if the borrower fails to repay the loan.