Financial lending transactions use collateral to add an extra layer of security for lending companies. If you are ever involved in any situation involving large-scale loans, it is essential to have a good understanding of what it is and how it works in general.
1. Collateral Explained and Clarified
Collateral is property or another asset with value that a borrower will offer to a lender to secure a loan. The lender can seize the collateral if the borrower defaults on their payments, allowing the lender to recoup their losses. In most cases, these assets remain in place until the borrower fully repays the loan.