collateral(redirected from collateral circulation)
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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.
Security for a debt.