ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Collateral is an asset pledged by a borrower, to a lender (or a creditor), as security for a loan.

Detailed explanation-2: -Collateral security is any other security offered for the said credit facility. For example, hypothecation of jewellery, mortgage of house, etc. Example: Land, Plant & Machinery or any other business property in the name of a proprietor or unit, if unencumbered, can be taken as primary security.

Detailed explanation-3: -A collateral loan is often called a secured loan. This means the loan is guaranteed by something you own. And if you can’t pay your loan back, the lender has the right to claim the collateral, whether it’s a… Car. Savings account.

Detailed explanation-4: -Collateral is an item of value, such as property or assets, that is pledged by an individual (borrower) in order to guaranty a loan. Upon default, the collateral becomes subject to seizure by the lender and may be sold to satisfy the debt.

Detailed explanation-5: -Put simply, collateral is an item of value that a lender can seize from a borrower if he or she fails to repay a loan according to the agreed terms.