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TYPES OF COLLATERAL
What is collateral in the context of bank lending?
Collateral is an asset or property pledged by a borrower to a lender as security for a loan, which the lender can seize and sell if the borrower defaults on repayment.
What is the meaning of the term 'tangible collateral' in banking?
Physical assets like property, gold, or machinery pledged as security.
What is the difference between primary security and collateral security?
Primary security is the asset directly created out of the bank credit (e.g., stock purchased with the loan), whereas collateral security is an additional asset provided to cover any shortfall in recovery.
What is an intangible collateral in the context of secured lending?
Non-physical assets like goodwill, patents, or receivables used as security.
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