The asset or assets that a borrower pledges in order to guarantee repayment of a loan is called as

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Q: (CDS-I/2021)
The asset or assets that a borrower pledges in order to guarantee repayment of a loan is called as

question_subject: 

Science

question_exam: 

CDS-I

stats: 

0,39,13,5,39,1,7

keywords: 

{'collateral': [0, 0, 0, 1], 'loan': [1, 0, 1, 6], 'repayment': [0, 0, 0, 5], 'borrower': [0, 0, 0, 3], 'guarantee card': [0, 0, 0, 1], 'assets': [0, 1, 1, 9], 'asset': [0, 0, 0, 3], 'bond': [0, 0, 2, 4], 'cheque': [1, 0, 0, 1]}

The correct answer to the question is option 2: Collateral.

Collateral refers to the asset or assets that a borrower pledges or offers to the lender as a form of guarantee or security for repayment of a loan. It acts as a form of assurance for the lender that they can recover their money in case the borrower fails to repay the loan.

Option 1: Cheque is incorrect because a cheque is a written order to a bank to pay a specific amount of money to the payee, and it is not typically used as collateral for a loan.

Option 3: Guarantee card is also incorrect. A guarantee card is a document that provides assurance or guarantee for a product or service, and it is not related to loan repayment or collateral.

Option 4: Bond is incorrect as well. A bond is a debt security in which the issuer owes the holders a debt and is obligated to repay the principal amount along with interest. While bonds can be traded and have value, they are not typically used as collateral for loans.

It is important to understand the concept of collateral as it is a crucial aspect of lending and borrowing.

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