Short Definition –
Collateral is an asset either tangible or intangible that a borrower offers lenders to guarantee a loan repayment.
Extended Definition –
Collateral is offered by a borrower to a lender as security as loan repayment. The collateral can be in the form of buildings, land, vehicles, or other physical property. However, other collateral may be investment funding, payment rights or accounts receivable. It is the secondary source of payment for the loan. The first source being cash payments. The collateral would be seized by the lender after loan repayment failure.
What Is Collateral?