Collateral

RECENT NEWS
New York Times  3 hrs ago  Comment 
A confidential report to the bankrupt city offers a loan of $500 million to $3 billion, collateralized by pieces in the Detroit Institute of Arts, at a rate of Libor plus 5.5 to 8.5 percentage points.
Mondo Visione  Aug 6  Comment 
Sapient Global Markets, a division of Sapient (NASDAQ: SAPE), and a leading global provider of business technology and consulting services for the capital and commodity markets, today announced further enhancements to its Compliance Management and...
Mondo Visione  Jul 30  Comment 
Confisio Managed Services Ltd (Confisio), a premier supplier of customized turnkey solutions to the financial services industry, today announced that it is launching a collateral valuation solution in conjunction with Dion Global Solutions (Dion)...
Mondo Visione  Jul 22  Comment 
Cooperation will further deepen the collateral / liquidity pool for mutual customers by automatically connecting them to Clearstream’s Global Liquidity Hub   Deutsche Bank benefits from Clearstream’s integrated collateral management...
Mondo Visione  Jul 16  Comment 
Rockall Technologies, a leading financial services solutions company, is delighted to announce that its systematic tracking of collateral management solution, STOC, has been selected by Nordea after a detailed evaluation of the solutions in the...
Mondo Visione  Jun 18  Comment 
A comprehensive academic studypublished at the London School of Economics and Political Science (LSE) and supported by The Depository Trust & Clearing Corporation (DTCC) has revealed that although an overall shortage of collateral (1) is...
New York Times  Jun 12  Comment 
The direct damage looks manageable, but confidence in the country's giant credit system has eroded, writes John Foley of Reuters Breakingviews.
New York Times  Jun 11  Comment 
The authorities are investigating loans based on collateral of metals at a Chinese port, with implications for Western banks and the Chinese credit market.




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Collateral is an asset or assets offered by a borrower in order to procure a loan. Should the borrower default on his payment(s), the lender would take possession of the collateral, which may then be sold to recoup the lender's losses.

Technically, collateral could be any asset, though typically it takes the form of personal property, investment securities, or real estate, the values of which can be readily determined.

Other terms in common use in the market are"margin", "margin asset" and "margin agreement" and similar terms using "credit support" instead of "collateral" or "margin," collateral", "collateral asset" and"collateral agreement." [1]

When a lender offers a loan against collateral offered by the borrower, the lender is said to take a security interest in the collateral. [2]

Examples

  • A woman takes out a mortgage to pay for her home. As collateral, she offers the home itself. Should she default on the loan, the lender (typically a bank) would take possession of the home. The bank may then sell the property to recoup its losses.
  • A man needs a cash loan to pay for several large, immediate expenses. As collateral, he offers the lender his car. Should he default on the loan the lender would take possession of the car, which he or she may sell to recoup losses.
  • In Uruguay, no private bank would accept cattle as collateral for a loan. By contrast, in Kansas, cattle are considered the best collateral for a loan.

14c., "accompanying," also "descended from the same stock," "side by side, "together" "parallel, along the side of" 16c., "colleague, associate." Meaning "thing given as security" is from 1832, Amer.Eng., from plrase collateral security (1720). [3]

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