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Collateral (finance)

For other uses of the term Collateral, see the collateral disambiguation page.

Collateral is a word used for assets that secure a loan. For example, in the case of a mortgage the house serves as the collateral for the mortgage-loan. This way, the bank is secured against the default risk of the borrower not being able to meet the interest payments. In case of default the bank can sell the house and get its money back.

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