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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.
Collateral and security are two terms that can be confused with one another. People often think the terms are one and the same. While collateral is defined as any property or asset that is given by the borrower to the lender, security refers to a broad set of financial assets used as collateral for a loan.
Collateral. Collateral is an asset you can pledge to the lender as an additional form of security, should you not be able to repay the loan. Collateral can help a borrower secure the financing they need and can help the lender recoup their investment if the borrower defaults on the loan.
Collateral is an asset or form of physical wealth that the borrower owns like house, livestock, vehicle etc. It is against these assets that the banks provide loans to the borrower. The collateral serves as a security measure for the lender.
The lenders ask for a collateral before lending because: It is an asset that the borrower owns and uses this as a guarantee to the lender ? until the loan is repaid. Collateral with the lender acts as a proof that the borrower will return the money.
Collateral is an asset or form of physical wealth that the borrower owns like house, livestock, vehicle etc. It is against these assets that the banks provide loans to the borrower. The collateral serves as a security measure for the lender.
In lending, collateral is typically defined as an asset that a borrower uses to secure a loan. Collateral can take the form of a physical asset, such as a car or home. Or it could be a financial asset, like investments or cash. Lenders may require collateral for certain loans to minimize their risk.
Types of Collateral When you take out a mortgage, your home becomes the collateral. If you take out a car loan, then the car is the collateral for the loan. The types of collateral that lenders commonly accept include cars?only if they are paid off in full?bank savings deposits, and investment accounts.