Collateral

Collateral is an asset or property that a borrower pledges to a lender as security for the repayment of a loan. It serves to mitigate the lender's risk, as it can be seized and sold to recover losses if the borrower defaults on their loan obligations. By providing collateral, borrowers can often secure larger loans, obtain more favorable interest rates, or qualify for loans they might not otherwise receive, as it reduces the perceived risk for the financial institution.