How does the lender determine the value of the collateral?

The lender may determine the value of the collateral by using a variety of methods, such as appraisals or market analysis. The lender may also consider factors such as the condition of the collateral, the current market demand, and the potential resale value. The lender will typically use a combination of these factors to determine the current value of the collateral, which will be used to determine the maximum loan amount that can be granted. It's important to note that the lender may also require a certain loantovalue ratio, which is the ratio of the loan amount to the value of the collateral, to ensure that they are adequately protected in the event of default.