What is the asset pledged to secure a loan called?

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Multiple Choice

What is the asset pledged to secure a loan called?

Explanation:
Collateral is the asset pledged to secure a loan. It lowers the lender’s risk by giving them a claim to that asset if you don’t repay. If you default, the lender can seize or sell the collateral to recover what you owe. This concept is why secured loans exist—the asset acts as protection for the lender. The other terms describe the amount owed (debt, principal balance) or the loan itself, not the asset used to secure it.

Collateral is the asset pledged to secure a loan. It lowers the lender’s risk by giving them a claim to that asset if you don’t repay. If you default, the lender can seize or sell the collateral to recover what you owe. This concept is why secured loans exist—the asset acts as protection for the lender. The other terms describe the amount owed (debt, principal balance) or the loan itself, not the asset used to secure it.

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