Collateralization


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Collateralization

What is Collateralization?

When a borrower pledges an asset in order to get a loan, this is known as collateralization. When a borrower lacks a sufficient lending history or cash flows to provide assurance that it can repay a loan, a lender may seek collateral. In a tight credit market with few funding options, a lender may be able to impose a collateralization requirement on borrowers.

Understanding Collateralization

Collateralization happens when a borrower pledges an asset in order to acquire a loan. When a borrower lacks a sufficient lending history or cash flows to provide assurance that it can repay a loan, the lender may seek collateral. In a tight credit market with few funding options, a lender may also be able to impose a collateralization demand on borrowers.

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Damir Yalalov

Damir is the Editor/SEO/Product Lead at mpost.io. He is most interested in SecureTech, Blockchain, and FinTech startups. Damir earned a bachelor's degree in physics.

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