Read the information given below and select the correct option
Rohan has taken a loan of Rs.5 lakhs from the bank to purchase a house on 12% rate of interest.
He has to submit papers of new house and salary record to the bank. What is this process called as?
- Interest Rate
- Principal Amount
So, the correct answer is (B): Collateral .
Collateral is an asset that the borrower owns (such as land , building , vehicle , livestock , and deposits with banks ) and uses this as a guarantee to a lender until the loan is repaid.