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Primary security is the security someone offered to a bank to cover any risk the bank faces by granting a credit facility to a borrower. However, sometimes a single security may not be sufficient to cover the risk.
Example: X bank grants a credit facility of $100 to a borrower called 'B,' and the borrower offers a bare land of $60 to the bank as the security. As you can see, the is bank facing a risk of $40.
To cover up the balance of the credit risk, the borrower needs to offer another security. This new security is known as a collateral security.
- In that case, any security other than the primary security is a collateral security.
- It is very common that collateral securities are used to cover more than a single credit facility risk. Collateral securities are generally used to cover the balance of the risk, which is unable to cover by primary. However, the actual value of the collateral security is much higher than that. (Example: The borrower 'B' offers a commercial property of $60 as the collateral security of above loan. Now he can apply for another loan by offering the balance of $20 of the same property.)
What else can I help you with?
What does clean loan mean?
It is a kind of loan where there is no primary or secondary security or collateral taken by the bank.
What is the difference with primary market mortgage and secondary market mortgage?
The Primary Mortgage is that relationship that exists between a lender and a potential borrower. on the other hand, the Secondary Mortgage Market is the relationship that exists after the loan is closed and the lender markets the collateral of that loan for sale to an investor.
What is difference between primary and secondary card holder?
The major difference is that the Primary Account holder is responsible for all the amounts due on both the Primary Card and the Secondary Card.
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What is clean overdraft limit?
It is the limit provided by the Banks/ Financial Institutions to a party without any depositing of primary security. It is given on the basis of market value of the property/Collateral and its' last year's sale value
What is the main difference between primary and collateral duty command master chiefs is that a primary duty command master chief is permanently assigned to a command by the bureau of naval personnel?
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What does clean loan mean?
It is a kind of loan where there is no primary or secondary security or collateral taken by the bank.
The main difference between primary and collateral duty Command Master Chiefs is that a primary duty Command Master Chief is permanently assigned to a command by the Bureau of Naval Personnel.?
The main difference between primary and collateral duty Command Master Chiefs lies in their assignment status and responsibilities. A primary duty Command Master Chief is permanently assigned to a command and plays a central role in leadership and operational effectiveness. In contrast, a collateral duty Command Master Chief typically has additional responsibilities alongside their primary role and may not be permanently assigned to that specific command. This distinction affects the level of commitment and focus each type of Command Master Chief can dedicate to their duties.
What is the difference between primary and secondary vitamin deficiency?
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What is the meaning of the term Collateral?
Collateral is: 1. Secondary, subordinate, or supplementary item accompanying a primary item. 2. Specific asset (such as land or building) pledged as a secondary (and subordinate) security by a borrower or guarantor. The principal security is usually the borrower's personal guaranty, or the cash flow of a business. Except for highly creditworthy customers (who can get loans against only their signatures) lenders always demand a collateral if the primary security is not considered to be reliable or sufficient enough to recover the loan in case of a default. See link below.
Identify the difference between primary sector and secondary?
Identify the difference between primary sector and secondary sector
What is the difference with primary market mortgage and secondary market mortgage?
The Primary Mortgage is that relationship that exists between a lender and a potential borrower. on the other hand, the Secondary Mortgage Market is the relationship that exists after the loan is closed and the lender markets the collateral of that loan for sale to an investor.
The difference between primary and secondary reserves?
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What is the difference between primary data and secondary data Don't make it complicated please?
The difference between primary data and secondary data is that primary data is the information from the original research.
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