Tagatisest

Tagatisest, or collateral, refers to an asset pledged to secure a loan or other obligation. The borrower offers property or rights as security, giving the lender a claim if terms are not met. The purpose is to reduce credit risk and enable funding at more favorable terms.

Common forms of collateral include real assets such as real estate or vehicles; movable property like equipment or inventory; and financial or intangible assets such as cash deposits, bonds, shares, or accounts receivable. In many legal systems, different security interests exist, including pledges (where the asset is held by the lender), mortgages (rights over real property), and liens. The exact structure depends on jurisdiction and contract.

Lenders typically assess collateral value, liquidity, and fluctuations relative to the loan amount, often described as loan-to-value ratios. At default, the lender may seize or foreclose on the collateral and sell it to recover owed funds, then apply proceeds to the debt in accordance with priority rules. Borrowers benefit from improved access to credit but risk losing the asset pledged.

Collateral arrangements also affect borrowing terms, such as interest rates and credit limits, and may involve cross-collateralization, where multiple obligations are secured by the same asset.

In Estonia and many other jurisdictions, collateral agreements are governed by contract law and may require formal steps, such as registration for certain real-property or financial assets, to create enforceable security.