Business and Personal Finance Dictionary

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• COLLATERAL
  
  Assets with monetary value, such as stocks, bonds, or real estate, that are used to guarantee a loan are considered collateral. If the borrower defaults and fails to fulfill the terms of the loan agreement, the collateral, or some portion of it, becomes the property of the lender. For example, if you borrow money to buy a car, the car is the collateral. If you default, the lender can repossess the car and sell it to recover the amount you borrowed. Loans guaranteed by collateral are also known as secured loans.
  
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