Why do some lenders require borrowers to secure credit? a. to prevent defaults b. to guarantee full repayment c. to avoid any losses d. to reduce risk

The correct answer is D.

Lenders give some money to borrowers in exchange for a retribution in the form of interest payments. In some cases, the interest charged is higher because the risk assumed by the lender with a certain borrower is very high. For example, in the case of countries' debt, debt from countries with larger risk of default has a large risk premium attached, which increases the interest that has to be repaid for that debt.

Another method to decrease the risk assumed is to provide secured credits, where the lender requires a collateral from the borrower, than the lender will keep in case of default in the repayments of the principal.

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