COLLATERAL SECURITY Meaning and
Definition
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Collateral security refers to a specific type of security that is pledged by a borrower to a lender to help secure a loan or credit. It serves as a form of guarantee that provides the lender with some form of security should the borrower default on the loan. This collateral can take various forms, such as physical assets like real estate, vehicles, or equipment, or financial assets like stocks, bonds, or cash deposits.
The purpose of collateral security is to protect the lender's interests and reduce the risk associated with lending money. In the event that the borrower cannot repay the loan or fulfill their obligations, the lender can seize and sell the collateral to recover their losses. The value of the collateral is typically evaluated by the lender before the loan is approved as it represents the maximum amount that the lender can potentially recover.
Collateral security provides added assurance to the lender, increasing the chances of getting approved for a loan or credit. It also allows borrowers with limited credit history or lower credit scores to secure financing by providing valuable assets as collateral. However, it is crucial for borrowers to understand the risks involved as collateral security implies the potential loss of the pledged assets if they default on the loan.
Overall, collateral security serves as a safeguard for lenders, giving them a layer of protection and reducing the risk of lending money.
Common Misspellings for COLLATERAL SECURITY
- xollateral security
- vollateral security
- follateral security
- dollateral security
- cillateral security
- ckllateral security
- clllateral security
- cpllateral security
- c0llateral security
- c9llateral security
- coklateral security
- coplateral security
- coolateral security
- colkateral security
- colpateral security
- coloateral security
- collzteral security
- collsteral security
- collwteral security
- collqteral security
Etymology of COLLATERAL SECURITY
The word "collateral" can be traced back to the Latin word "collateralis", which is a combination of "col-" meaning "together" and "latus" meaning "side". Originally, it referred to something situated or running alongside something else.
In the context of finance, "collateral" refers to assets or property that is pledged as security for a loan or other financial obligation. The term "security" is derived from the Latin word "securitas", meaning "freedom from care" or "safety". Therefore, "collateral security" describes the assets or property provided as a guarantee for the fulfillment of a financial commitment, ensuring the lender's safety and reducing their risk.
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