Collateral is asset (such as a vehicle) pledged to a lender until a loan is repaid. If the borrower defaults, the lender has the legal right to seize the collateral and sell it to pay off the loan. Comprehensive and Collision coverages are required by lenders when a car is the collateral for a loan.

Collateral definition in Banking & Finance

Collateral is a borrower’s possession of adequate net worth, quality assets, or other items of value that give added support to his or her ability to repay a loan.

Collateral is the property that is pledged to the lender to guarantee payment in the event that the borrower is unable to make debt payments.

Webster Dictionary Meaning

1. Collateral
- Coming from, being on, or directed toward, the side; as, collateral pressure.
- Acting in an indirect way.
- Related to, but not strictly a part of, the main thing or matter under consideration; hence, subordinate; not chief or principal; as, collateral interest; collateral issues.
- Tending toward the same conclusion or result as something else; additional; as, collateral evidence.
- Descending from the same stock or ancestor, but not in the same line or branch or one from the other; -- opposed to lineal.
2. Collateral
- A collateral relative.
- Collateral security; that which is pledged or deposited as collateral security.
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