Collateral

• noun :

something pledged as security for repayment of a loan, to be forfeited in the event of a default.

• adjective :

additional but subordinate; secondary.

descended from the same stock but by a different line.

• Financial Usage :

Collateral is something valuable, such as a property you own, that you pledge (temporarily give to) a bank, financial company or other moneylender as a guarantee of your loan repayment.

The moneylender will hold your collateral until your loan is completely paid in full. If you fail to make your loan payments, the bank will seize (take away) your property to recover their losses. This way, there’s no risk that they’ll lose the money they gave you.

If Mr. Anil intends to use his farm as collateral for his business loan, he will have to show proof of ownership to the bank.

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