what is over collateralization 
over collateralization oc is the provision of collateral that is worth more than enough to cover potential losses in cases of default for example a business owner seeking a loan could offer property or equipment worth 10 or 20 more than the amount being borrowed over collateralization may be used by companies issuing bonds for the same reason in the financial services industry over collateralization is used to offset the risk in products such as mortgage backed securities in this case additional assets are added to the security to cushion any capital losses due to defaults on the individual loans that are packaged in the security in any case the purpose of over collateralization is to increase the credit rating or the credit profile of the borrower or the issuer of securities by reducing the risk to the investor 