Collateral security financial definition of collateral security
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collateral security an ASSET which a BORROWER is required to deposit with, or pledge to, a LENDER as a condition of obtaining a LOAN, which can be sold off if the loan is not repaid. For example, a bank may require a borrower to hand over the title deeds to his house as collateral for a BANK LOAN, or a company may issue DEBENTURE stock as a means of obtaining loan capital, which is secured by a charge on the company's business assets.
collateral security the ASSETS pledged by a BORROWER as security for a LOAN, for example, the title deeds of a house. In the event of the borrower defaulting on the loan, the LENDER can claim these assets in lieu of the sum owed. See DEBT, DEBTOR.