Question

Why do lenders ask for collateral while lending?

Answer 1

Lenders ask for collateral while lending, as a security for the loans they give to the borrower. They keep it as an asset until the loan is repaid.
Collateral is an asset or form of physical wealth that the borrower owns like house, livestock, vehicle etc. It is against these assets that the banks provide loans to the borrower. The collateral serves as a security measure for the lender.