collateral

Collateral

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

---

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.

---

Collateral. Assets with monetary value, such as stock, bonds, or real estate, which are used to guarantee a loan, are considered collateral.

If the borrower defaults and fails to fulfill the terms of the loan agreement, the collateral, or some portion of it, may become the property of the lender.

For example, if you borrow money to buy a car, the car is the collateral. If you default, the lender can repossess the car and sell it to recover the amount you borrowed.

Loans guaranteed by collateral are also known as secured loans.

---

collateral

Security for a debt.

---

Collateral

What Does Collateral Mean?

Properties or assets that secure a loan or another debt. Collateral becomes subject to seizure on default.

Investopedia explains Collateral

Collateral is a form of insurance to the lender in case the borrower fails to pay back the loan. For example, if a person gets a mortgage, the collateral would be the house. In margin stock trading, the securities in the account act as collateral against the margin loan.

Related Terms:
• Asset
• Asset-Backed Security
• Margin
• Margin Call
• Regulation T