COLLATERAL Meaning and
Definition
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Collateral is a noun that refers to something pledged or given as security for repayment of a loan. It is an asset or property, often valuable, that a borrower agrees to give up to the lender if they are unable to repay the loan. In this context, collateral serves as a form of protection for the lender, ensuring that they can still recoup their losses even if the borrower defaults on the loan.
Typically, collateral can take the form of tangible assets like real estate, vehicles, or jewelry. However, it can also include intangible assets such as stocks, bonds, or savings accounts. The value of the collateral is assessed by the lender, usually through an appraisal or evaluation, to determine its worth in relation to the loan amount. This evaluation helps determine the maximum amount that can be borrowed using the collateral as security.
Collateral plays a significant role in lending and borrowing transactions, providing a level of assurance to lenders and reducing their risk. It gives them a legal right to take possession of and sell the collateral in order to recover their losses. For borrowers, collateral can help secure more favorable loan terms, including lower interest rates or higher loan amounts.
Overall, collateral serves as a fundamental concept in personal and business finance, establishing a sense of security for lenders and borrowers alike.
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Side by side, or on the side; running parallel; happening or coming together in connection with an event, as collateral circumstances; in addition to, or over and above; not direct or immediate; descended from a common ancestor or stock-opposed to lineal.
Etymological and pronouncing dictionary of the English language. By Stormonth, James, Phelp, P. H. Published 1874.
Top Common Misspellings for COLLATERAL *
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Other Common Misspellings for COLLATERAL
Etymology of COLLATERAL
The word "collateral" originated from the Latin term "collaterālis", which is a combination of two words: "com" meaning "with" or "together", and "latus" meaning "side". The literal translation of "collaterālis" is "running alongside" or "parallel". Over time, this term was adopted into Old French as "colateral", which eventually became "collateral" in English. The word gained specific financial connotations in the early 19th century, referring to assets or securities given as a guarantee for a loan.
Similar spelling words for COLLATERAL
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