Collateral
A security for the repayment of a loan. In the case of
real estate, a piece
of property is collateral to ensure the borrower's ability to repay what is owed.
Something of value (land, a home, a car, etc.) that is pledged as security to ensure the
payment of a debt. Collateral is promised to a lender until a loan is repaid. If the
borrower defaults, the lender has the right, by law, to seize the collateral.
Example:
The vehicle you purchased is the collateral for your
Wachovia Dealer Services loan.
