In the eastern coast of the country lived a farmer totally dependent on agriculture for his living. He owned some land where he harvested rice and wheat. He was struck by heavy losses for some years where he happened to lose a lot of money. He tried to borrow money from his friends to start the cultivation but nothing turned good. Finally he met one of a banker in his village who told him about the collateral loan.
Collateral loans are secured personal loans which offers loan at very low interest rates. Here the loan is issued to a borrower for a secured property where if the loan is not repaid, then the issuer of the loan can sell away the secured property that is offered for and take away his money. The collateral can be an ownership in property of land, building, shares or bonds etc. Collateral for the loan may also be any kind of expected collateral for example crops to be cultivated.
The farmer was excited on hearing about the collateral loans. He used his crops to be harvested as collateral and borrowed from the bank and had a good yield.