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GLOSSARY: Enter search term:
Browse dictionary by letter: A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Glossary Term: COLLATERAL

Definition(s) for COLLATERAL:


1. ) refers to hard assets of the borrower, such as real estate or equipment, for which a lender has a legal interest until a loan obligation is fully paid off. Assets pledged as security for a loan. If the 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.

2. ) Securities or other property pledged by a borrower to secure repayment of a loan.

3. ) Property that is offered to secure a loan or other credit and that becomes subject to seizure on default. (Also called security)

4. ) An asset such as an automobile or a piece of property that a person uses to take out a loan, promising to give the asset to the lender if loan payments cannot be met. Collateral also refers to the collection of receivables, such as mortgages, which are used to back the interest and/or principal security.

5. ) The loan value of marginable securities; generally used to finance the writing of uncovered options.

6. ) Securities against which loans are made. If the value of the securities (relative to the loan) declines to an unacceptable level, this triggers a margin call. As such, the investor is asked to post additional collateral or the securities are sold to repay the loan.

7. ) Securities or other assets pledged by a borrower to guarantee a loan.


See Also:
AS-EXTRACTED COLLATERAL, COLLATERAL TRUST BONDS, CASH COLLATERAL, CROSS-COLLATERAL, CREDIT SUPPORT COLLATERAL ACCOUNT


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