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CREDIT & RISK MANAGEMENT (FIN625) Assignment – 1 Total Marks: 10 Due Date: July 28, 2020

Topic: Collateral/Security


Good credit is one that can stand on its own that is repayment of the loan should be
ensured from the activities in which the loan or credit is going to use. However, the
generation of cash from such activities is dependent upon many factors and confronted
with both business risks and financial risks. Whereas advantageous changes positively
affect the cash generation, unfavorable changes may reduce the cash generation and
may affect the ability to repayment negatively. In these circumstances, creditors required
security against the loan for the better protection. Hence, to provide surety of repayment,
borrowers give some collateral/security against the borrowed amount. In this way,
creditors can secure the loan amount and may obtain benefits of the collateralized
transaction.
Since borrowers need to provide some collateral/security against the loan amount,
therefore, it is very important to know how borrowers can obtain benefits from provided
collateral/security and what kind of hassles borrowers can face in providing security
against a loan.


Required:


1. Enlist and discuss in detail the advantages a borrower can gain by giving collateral
/security against the loan. (Marks 5)
2. Enlist and discuss in detail the disadvantages a borrower can face by giving
collateral/security against the loan. (Marks 5)

2
IMPORTANT
24 hours extra / grace period after the due date is usually available to overcome
uploading difficulties. This extra time should only be used to meet the emergencies
and above mentioned due dates should always be treated as final to avoid any
inconvenience.
OTHER INSTRUCTIONS
DEADLINE
• Make sure to upload the solution file before the due date on VULMS.
• Any submission made via email after the due date will not be accepted.
FORMATTING GUIDELINES
• Use the font style “Times New Roman” or “Arial” and font size “12”.
• It is advised to compose your document in MS-Word format.
• You may also compose your assignment in Open Office format.
• Use black and blue font colors only.
REFERENCING GUIDELINES
• Use APA style for referencing and citation. For guidance search “APA reference
style” in Google and read various website containing information for better
understanding or visit

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