This article is about assets that secure a debt obligation. For other uses, see Collateral. In lending agreements, collateral is a borrower's asset that is forfeited to the lender if the borrower is insolvent --- that is, unable to pay back the principal and interest on the loan. When insolvent, the borrower is said to default on the loan, in which case the lender becomes the owner of the collateral. In a mortgage, for instance, the real estate being acquired with the help of the loan serves as collateral. Should the buyer fail to pay mortgage interest, the ownership of the real estate is transferred to the bank in the process known as foreclosure. Collateral could mean: Collateral in finance means a security or guarantee (usually an asset) pledged for the repayment of a loan if one cannot procure enough funds to repay. ...
In finance, default occurs when a debtor has not met its legal obligations according to the debt contract, e. ...
This article is about the legal mechanism used to secure property in favor of a creditor. ...
Concept of Collateral Collateral, especially within banking, may traditionally refer to secured lending (also known as asset-based lending) as well as more recently as collateralisation arrangements to secure trade transactions (also known as capital market collateralization). The former often presents unilateral obligations, secured in the form of property, surety, guarantee or other as collateral (originally denoted by the term security), whereas the latter often presents bilateral obligations secured by more liquid assets such as cash or securities, often known as margin. Another example might be to ask for collateral in exchange for holding something of value until it is returned (ie, I'll hold onto your wallet while you borrow my cell phone). For other uses, see Bank (disambiguation). ...
In the simplest meaning, asset-based lending is any kind of lending secured by an asset. ...
This article or section does not cite any references or sources. ...
A surety is a person who agrees to be responsible for the debt or obligation of another. ...
This article needs to be wikified. ...
For other uses, see Cash (disambiguation). ...
For security (collateral), the legal right given to a creditor by a borrower, see security interest A security is a fungible, negotiable instrument representing financial value. ...
In finance, a margin is collateral that the holder of a position in securities, options, or futures contracts has to deposit to cover the credit risk of his counterparty. ...
In many developing countries, the use of collateral is the main way to secure bank financing. The ease of acquiring a loan depends on the ability to use assets, whether real estate or any other, as collateral.
See also A security interest is a property interest created by agreement or by operation of law over assets to secure the performance of an obligation (usually but not always the payment of a debt) which gives the beneficiary of the security interest certain preferential rights in relation to the assets. ...
Credit risk is the risk of loss due to a debtors non-payment of a loan or other line of credit (either the principal or interest (coupon) or both). ...
Hypothecation is a pledge of property as security for a debt without transfer of possession. ...
Cross-Collateralization is a term used when the collateral for one loan is also used as collateral in a different loan. ...
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