what is collateral 
collateral in the financial world is a valuable asset that a borrower pledges as security for a loan for example when a homebuyer obtains a mortgage the home serves as the collateral for the loan for a car loan the vehicle is the collateral a business that obtains financing from a bank may pledge valuable equipment or real estate owned by the business as collateral for the loan in the event of a default the lender can seize the collateral and sell it to recoup the loss other nonspecific personal loans can be collateralized by other assets for instance a secured credit card may be secured by a cash deposit for the same amount of the credit limit 500 for a 500 credit limit 