- Properties or assets that are offered to secure a loan or other credit. Collateral becomes subject to seizure on default.
Collateral is a form of security to the lender in case the borrower fails to pay back the loan.
For example, if you get a mortgage, your collateral would be your house. In margin trading, the securities in your account act as collateral in the case of a margin call.
Investment dictionary. Academic. 2012.