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In a hypothetical scenario, someone in urgent need of money approaches a lender, Sal, requesting $10,000 for a kidney transplant. Although Sal has the money, he is hesitant due to concerns about the borrower's job security post-surgery and the economic climate. To mitigate his risk, Sal considers the borrower's valuable watch, which the borrower claims is worth $30,000. The discussion emphasizes the importance of collateral when lending money, as it provides assurance to the lender that the loan can be recovered if necessary.