What is loan collateral?

A collateral loan is a loan secured by an asset you own. You promise to give up ownership of the asset over to the lender if you cannot repay the loan as agreed. By using a collateral loan, the lender has less risk, and it may be easier for you to get financing. Make sure you know understand the basics of collateralize loans before you pledge your assets.

Overview of Collateralize Loans

Collateralize loans are used when the lender wants assurance that they won’t lose all their loaned money. When you pledge an asset as collateral, they can take the asset, sell it, and get their money back. Contrast this with an unsecured loan, where all they can do is report poorly on your credit or bring legal action against you.

Bookmark this page to: