Collateral

This is an asset pledged to a creditor or lender as a security for a loan until the loan is paid. It can be in any form e.g. car, mortgage, land etc.

When there is a failure on the part of the borrower to pay back the loan, the lender may have the legal right to become the owner of the asset.

But when the borrower fulfils paying off the loan, the asset can then be fully granted him. They are usually pledged according to the loan lent.

Posted in: Glossary of Auto Insurance (C)