Why do lenders often require collateral before lending loan ? Choose the…

CBSE Social Science class 10 question and answer | Why do lenders often require collateral before lending loan ? Choose the most suitable option from the following.

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Why do lenders often require collateral before lending loan ? Choose the most suitable option from the following.

(a) To lower interest rates for borrowers.
(b) To establish personal relations.
(c) To increase their profit margins.
(d) To mitigate the risk of loan default.

Ans. the correct answer is (d) To mitigate the risk of loan default.