August 20, 2022

Collateral

Collateral

What is Collateral?

Collateral is something valuable that you own, such as a car or a piece of property, that you present to a lender as recompense if you are unable to repay the loan. Lenders can recover your asset if you default on your loan, making lending to high-risk consumers a safer option.

Understanding Collateral

Collateral is often known informally as “skin in the game” since it reflects a borrower’s willingness to contribute something valuable to guarantee the loan.
How Does Collateral Work?
Borrowers might use collateral to demonstrate their commitment to repaying their debt. The premise is that if a borrower has something valuable that they could lose, they are more likely to make an effort to repay the loan. At the same time, the lender ends up taking on less risk.

Because a lender has the legal right to take and use the collateral object of value, if you default, it can reclaim at least some of the money loaned.In general, the collateral you supply must be valuable enough to allow the lender to recover some of its investment. For example, a lender may not consider a $1,000 item to be valuable enough to serve as collateral for a loan of $100,000 or more.

Read related articles:

« Back to Glossary Index

Disclaimer

In line with the Trust Project guidelines, please note that the information provided on this page is not intended to be and should not be interpreted as legal, tax, investment, financial, or any other form of advice. It is important to only invest what you can afford to lose and to seek independent financial advice if you have any doubts. For further information, we suggest referring to the terms and conditions as well as the help and support pages provided by the issuer or advertiser. MetaversePost is committed to accurate, unbiased reporting, but market conditions are subject to change without notice.

About The Author

Damir is the team leader, product manager, and editor at Metaverse Post, covering topics such as AI/ML, AGI, LLMs, Metaverse, and Web3-related fields. His articles attract a massive audience of over a million users every month. He appears to be an expert with 10 years of experience in SEO and digital marketing. Damir has been mentioned in Mashable, Wired, Cointelegraph, The New Yorker, Inside.com, Entrepreneur, BeInCrypto, and other publications. He travels between the UAE, Turkey, Russia, and the CIS as a digital nomad. Damir earned a bachelor's degree in physics, which he believes has given him the critical thinking skills needed to be successful in the ever-changing landscape of the internet. 

More articles
Damir Yalalov
Damir Yalalov

Damir is the team leader, product manager, and editor at Metaverse Post, covering topics such as AI/ML, AGI, LLMs, Metaverse, and Web3-related fields. His articles attract a massive audience of over a million users every month. He appears to be an expert with 10 years of experience in SEO and digital marketing. Damir has been mentioned in Mashable, Wired, Cointelegraph, The New Yorker, Inside.com, Entrepreneur, BeInCrypto, and other publications. He travels between the UAE, Turkey, Russia, and the CIS as a digital nomad. Damir earned a bachelor's degree in physics, which he believes has given him the critical thinking skills needed to be successful in the ever-changing landscape of the internet. 

Hot Stories
Join Our Newsletter.
Latest News

Swiss Crypto Bank SEBA Rebrands to AMINA Bank AG

by Kumar Gandharv
December 01, 2023

Web3 Fundraising Report Q3 2023: A Overview of Evolving Trends and Strategies

In this report, we explore all the trends in the AI, crypto and web3 sectors and identify ...

Know More

Virtual Reality Superior Than Video Conferencing for Remote Work Collaboration: PWC Report

In today’s modern era of remote work, the traditional landscape of digital meetings and workshops is undergoing ...

Know More
Join Our Innovative Tech Community
Read More
Read more
Bitcoin Rally Boosts Crypto Stocks to Nearly 19-Month High as December Begins
Markets News Report
Bitcoin Rally Boosts Crypto Stocks to Nearly 19-Month High as December Begins
December 1, 2023
KuCoin Ventures Allocates $20,000 Grant to Foster TON Ecosystem Expansion
News Report Technology
KuCoin Ventures Allocates $20,000 Grant to Foster TON Ecosystem Expansion
December 1, 2023
CGV and Web3 Labs Launch AIFocus Accelerator in Hong Kong to Propel Web3 and AI Convergence
Press Releases
CGV and Web3 Labs Launch AIFocus Accelerator in Hong Kong to Propel Web3 and AI Convergence
December 1, 2023
Swiss Crypto Bank SEBA Rebrands to AMINA Bank AG
News Report Technology
Swiss Crypto Bank SEBA Rebrands to AMINA Bank AG
December 1, 2023
What You
Need to Know

Subscribe To Our Newsletter.
Daily search marketing tidbits for savvy pros.