2. Collateral Provided Might Not Be Sufficient

Suppose you borrow $200,000 and provide collateral of a similar value. If the value of this collateral declines, for example, shares in a company that performs poorly, the lender can request you pledge additional collateral against the loan. Banks will also not hesitate to take legal measures to recover any difference between the amount owed and the value of the collateral pledged.

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