LENDING GLOSSARY
Collateral
Collateral
Assets pledged to secure a loan.
What does Collateral mean?
Assets pledged to secure a loan. Professionals may calculate, document or apply this concept differently depending on the transaction, accounting method, lender policy and governing documents. Borrowers should confirm the precise definition used in any term sheet or agreement.
Collateral in context
A lender may take a lien on trucks purchased with equipment financing.
Why it matters in financing
Collateral can influence how a lender, investor or advisor evaluates risk, pricing, structure, repayment capacity or transaction economics. It should be considered together with the complete financial picture rather than used alone.
Related lending terms
Educational information only. This definition is general, may not match a particular lender or contract, and is not financial, accounting, tax or legal advice.