Why do you think banks would always ask for collateral for loans?

[Stardom22]

For me l always ask myself why banks would ask for the collateral of loans whenever one asks for any type of loans from them even if they have good balances on their accounts.

 

[Trush Jodie]

Banks already take so much risks in giving a loan to a person. They get collateral to curtail the risk of losses when person fails to pay back.

 

[oliver991]

For me l always ask myself why banks would ask for the collateral of loans whenever one asks for any type of loans from them even if they have good balances on their accounts.

Banks ask for collateral because balances are not guaranteed to stay there. You can move or spend that money at any time. Collateral locks in repayment if income drops or priorities change. It also lowers the bank’s risk and regulatory capital needs. Even wealthy clients default sometimes, collateral protects the lender, not your cash flow.

 

[Suba]

In my country, banks offer loans with collateral, as well as uncollateralized loans, with loan limits reaching $6,000, depending on the customer and their business type. Banks require collateral primarily to minimize losses in the event of default.