Final answer:
When a lender offers a loan to a buyer for a house, collateral for the loan can be property or equipment, which the bank would have a right to seize and sell if the borrower does not repay the loan.
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. In addition, the bank conducts a credit check on the individual's past borrowing.
Another approach is to require a cosigner on a loan; that is, another person or firm who legally pledges to repay some or all of the money if the original borrower does not do so. Another approach is to require collateral, often property or equipment that the bank would have a right to seize and sell if the borrower does not repay the loan.