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Finance & Banking vocabulary · Loans & Credit

Collateral

Meaning in finance & banking, with examples

/kəˈlætərəl/nounCore term

In finance & banking, collateral means: An asset, such as property, cash or securities, that a borrower pledges to a lender and that the lender can sell if the loan is not repaid.

In Turkish: teminat, güvence

How it is used

Used in credit departments, loan agreements and risk reports. A borrower provides or pledges collateral; the bank values it and may ask for more if its value falls. Loans backed by collateral are called secured loans.

Example sentences

  1. The company offered its warehouse as collateral for the working capital loan.

  2. If the value of the collateral drops, we may ask the client for additional security.

Common collocations

  • provide collateral
  • pledge collateral
  • collateral value
  • cash collateral
  • additional collateral
  • unsecured loanA loan given without collateral, based only on the borrower's income and credit history. It usually has a higher interest rate than a secured loan.
  • mortgageA long-term loan used to buy a home or other property. The property secures the loan, so the lender can have it sold if the borrower does not repay.
  • guarantorA person or company that promises to repay a loan if the borrower cannot. The lender can then ask the guarantor to pay.
  • loanMoney that a bank or another lender gives to a person or company, which must be paid back over time, usually with interest.
  • credit riskThe risk that a borrower or another party will not pay back money it owes on time or in full, causing a loss for the lender.

This word in other fields

The same English word can have a different meaning in another field:

More terms: Loans & Credit

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This page explains English vocabulary for learners. It is not financial advice.