Banks take collateral to secure the obligations of people who owe them money as a way to reduce the risks associated with non-payment.Having a security interest in collateral will not prevent a debtor from defaulting but will reduce the risk that the bank will be unable to recover what it is owed.

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This statement is true. Banks take collateral from borrowers as a way to reduce their risk of not being able to recover the money owed in case of default. However, collateral does not guarantee payment and there is still a chance that the bank may not recover the full amount owed.

Banks Take Collateral to Secure the Obligations of People Who