What is an asset pledged to secure a loan called?

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Multiple Choice

What is an asset pledged to secure a loan called?

Explanation:
When a lender wants extra protection, an asset pledged to secure repayment is called collateral. Collateral gives the lender a claim to that asset if the borrower can’t repay, which helps the lender recover the loan and can lead to better terms for the borrower, like a lower interest rate or a larger loan amount. Examples include a house tied to a mortgage or a car tied to an auto loan. This concept differs from a general asset (any valuable resource), debt (what’s owed), or a loan (the money borrowed). So the asset used to back the loan is collateral.

When a lender wants extra protection, an asset pledged to secure repayment is called collateral. Collateral gives the lender a claim to that asset if the borrower can’t repay, which helps the lender recover the loan and can lead to better terms for the borrower, like a lower interest rate or a larger loan amount. Examples include a house tied to a mortgage or a car tied to an auto loan. This concept differs from a general asset (any valuable resource), debt (what’s owed), or a loan (the money borrowed). So the asset used to back the loan is collateral.

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