Collateral

Property or assets offered as security for a loan. If the borrower defaults, the lender can seize the collateral to recover the value of the loan.

More Details

Collateral is a type of asset that is pledged as security for a loan or other type of credit. It is used to reduce the lender's risk, by providing the lender with a way to recover its money if the borrower is unable to repay the loan.

Example

To build credit, you may want to open a secured credit card which uses collateral to guarantee you can pay your credit limit. This is usually in the form of a separate bank account.

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