collateral

Collateral

Properties or assets that are offered to secure a loan or other credit. Collateral becomes subject to seizure on default.

Notes:

Collateral is a form of security to the lender in case the borrower fails to pay back the loan.

For example, if you open a mortgage, your collateral would be your house. In margin trading, the securities in your account act as collateral in the case of a margin call.

See also: Loan, Margin, Mortgage, Non-Recourse Debt, Overcollateralization, Partial Release, Principal, Unsecured Loan

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Collateral

In the context of project financing, additional security pledged to support the project financing.

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collateral

Assets pledged as security for a loan. In the event that a borrower defaults on the terms of a loan, the collateral may be sold, with the proceeds used to satisfy any remaining obligations. High-quality collateral reduces risk to the lender and results in a lower rate of interest on the loan.