What is collateral?
Collateral: Collateral is an asset you pledge to secure a loan. If you do not repay as agreed, the lender can take the collateral to recover what it is owed.
Common collateral includes a home for a home equity loan, a vehicle for an auto loan, savings or a certificate of deposit for a savings-secured loan, and equipment or receivables for some business loans.
The loan agreement explains which asset secures the loan and what happens if you miss payments.
When you compare offers
Before you pledge collateral, consider what would happen to that asset if your income changed.
Related guides
- Home Equity Loan vs. HELOC: What to Compare
How a home equity loan differs from a HELOC, what it means that your home secures the debt, and the details worth comparing before you borrow against your equity.
- What Lenders Look At for Small Business Loans
The factors lenders commonly review for small business financing, the main types of business loans, and how to compare offers by total cost rather than payment alone.
This glossary is for general educational purposes and isn't financial, legal or insurance advice. Lendara is not a lender and does not make credit decisions. Lendara is a free online marketplace that connects you with participating lenders and providers, who set their own eligibility rules, rates, fees and terms. Lendara may receive compensation from partners, which may affect which offers appear and their order.