Collateral boosts loan approval rates, easing credit access for borrowers.
Using collateral when taking out a loan can help reduce the chances of being denied a loan or receiving less money than needed. A study looked at how collateral affects credit rationing and found that having collateral can decrease the likelihood of facing loan-size credit rationing by 15 to 40 percentage points. This means that using collateral can make it easier to get the full amount of money you need when applying for a loan.