Collatérale

Collatérale is a term of French origin that translates to "collateral" in English. It refers to an asset that a borrower pledges to a lender as security for a loan. If the borrower defaults on the loan, the lender has the right to seize and sell the collateral to recover their losses. This reduces the risk for the lender, making them more willing to extend credit. Common examples of collateral include real estate, vehicles, savings accounts, or investments. The value of the collateral is typically assessed to ensure it is sufficient to cover the loan amount. The specific terms regarding collateral are outlined in the loan agreement between the borrower and the lender. The concept of collateral is fundamental to secured lending and plays a crucial role in various financial transactions, from mortgages to business loans. It provides a tangible guarantee that incentivizes borrowers to repay their debts and protects lenders from potential financial harm.