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collateral

noun

/kəˈlat(ə)rəl/

IPA:

Dictionary definition of collateral

An asset or property that is pledged as security for a loan or other financial obligation.
"Collateral can include assets such as real estate, vehicles, or stocks and bonds."

Detailed meaning of collateral

The collateral serves as a form of protection for the lender, who can seize and sell the asset if the borrower fails to repay the loan. Common forms of collateral include real estate, vehicles, and stocks or bonds. Collateral can also refer to any additional security or assurance offered by a borrower, such as a guarantor or co-signer. The use of collateral is common in a wide range of financial transactions, including mortgages, car loans, and business loans. The amount and type of collateral required will depend on the lender's assessment of the borrower's creditworthiness and ability to repay the loan. Collateral is an important aspect of lending and borrowing, as it helps to reduce the risk of financial loss for both parties involved in the transaction.

Example sentences containing collateral

1. The car served as collateral for the auto loan.
2. The bank required collateral for the business loan.
3. She offered her jewelry as collateral for the loan.
4. The house was used as collateral for the mortgage.
5. The lender seized the collateral when the loan defaulted.
6. He put up his savings account as collateral for the investment.

History and etymology of collateral

The noun 'collateral' has its etymological origins in Latin. It comes from the Latin word 'collateralis,' which is a combination of 'com-' (meaning 'together with') and 'latus' (meaning 'side'). In its original Latin usage, 'collateralis' referred to something that was situated alongside or parallel to something else. Over time, this term evolved to describe the concept of assets or property pledged as security for a loan or other financial obligation, often alongside the primary financial transaction. The etymology of 'collateral' effectively captures its historical association with something that is closely related or connected, emphasizing its role as secondary security to support a financial agreement or debt.

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Further usage examples of collateral

1. Collateral is a safeguard for lenders in case of default.
2. The pawnshop accepted his watch as collateral for the loan.
3. The artwork was valuable collateral for the art gallery's loan.
4. Collateral assets can help secure better loan terms.
5. Failure to repay the loan could result in collateral forfeiture.
6. The bank evaluates the value of collateral during loan approval.
7. Collateral can provide borrowers with access to larger loans.
8. She used her stock portfolio as collateral for the loan.
9. The lender repossessed the collateral when the loan defaulted.
10. Collateral serves as a guarantee for lenders in lending.
11. The jewelry was held as collateral until the debt was paid.
12. Collateral can lower interest rates on loans.
13. The business owner pledged equipment as collateral for financing.
14. Collateral can mitigate the risk for both borrowers and lenders.
15. When applying for a loan, lenders often require borrowers to provide collateral as a form of security.
16. The value of collateral is often used to determine the amount of a loan that a borrower can receive.
17. If a borrower fails to repay a loan, the lender has the right to seize the collateral and sell it to recover their losses.
18. Collateral is a common requirement for both personal and business loans.
19. Some lenders may accept alternative forms of collateral, such as art or jewelry.
20. The use of collateral helps to reduce the risk of financial loss for lenders.
21. Collateral can also be used in other types of financial transactions, such as insurance policies.
22. The type and value of collateral required will vary depending on the lender and the nature of the loan.
23. Collateral can provide borrowers with access to loans that they might not otherwise qualify for.
24. The use of collateral is an important tool for managing risk in financial transactions.
25. Collateral is an essential aspect of the lending process that provides both borrowers and lenders with security and assurance.