Credit cards have certainly become a necessity in this millennium. Walk into any store and you will find the sign, “We accept credit cards”, hanging at the door. Moreover, people in general are increasingly going the credit card way when they have to pay a variety of bills. In the old days, if someone wanted to buy a product on credit, some sellers made it a point to ask for security. This was the way in which they reassured themselves that the buyer would pay for the wares. Similarly, when we approach banks for personal loans, they have what is called secured loans wherein the borrower needs to offer property or some other kind of an asset as collateral. The bank will hold custody of the same for as long as the loan is being repaid. However, if the borrower fails to make the payment, the bank can either sell or auction the asset and recover the amount that had been loaned. This collateral is held as security by the bank till the loan duration is completed. The asset used as collateral is finally returned to the borrower upon clearance of the loan amount.
By offering a secured loan, the creditor is saved from unnecessary risk. At the same time, the borrower...
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