collateral definition

collateral

Secondary, subordinate, or supplementary item accompanying a primary item.

Specific asset (such as land or building) pledged as a secondary (and subordinate) security by a borrower or guarantor. The principal security is usually the borrower's personal guaranty, or the cash flow of a business. Except for highly creditworthy customers (who can get loans against only their signatures) lenders always demand a collateral if the primary security is not considered to be reliable or sufficient enough to recover the loan in case of a default. A lien is created when the collateral is registered in the public records office, giving the registered lender priority over other lenders on the same asset or property. Lenders have the legal right to seize and sell a collateral if the borrower cannot pay back the loan as agreed. Sometimes the asset being financed (such as accounts receivable, inventory, machinery) is itself used as a collateral; in home mortgages the property being bought serves as a collateral. See also collateral value and cross collateral clause.

collateral is in the Banking, Commerce & Finance subject.

collateral appears in the definitions of the following terms: buying on margin, tangible asset, margin buying, accounts receivable financing, loan agreement, discounting of accounts receivable, unsecured creditor, collateral contract, non-recourse, intangible asset and

collateral appears in the other terms: collateral assignment, collateral cost, collateral source doctrine, collateral information, collateral value, cash collateral account, collateral contract doctrine, revolving collateral, collateral note, collateralization and

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