Why is collateral important to a borrower?

Collateral is important to a borrower because it serves as security for the lender, reducing the risk of loss in case the borrower defaults on the loan. By providing collateral, borrowers can often secure better loan terms, such as lower interest rates and higher borrowing limits, as it assures lenders of repayment. Additionally, having collateral can enhance a borrower's credibility and financial standing, making it easier to obtain financing when needed.