Collateral security

 

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Collateral security

Additional security a borrower supplies to obtain a loan.



Collateral security

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Collateral

Collateral

Asset than can be repossessed if a borrower defaults.


Collateral

Collateral

An asset pledged as a guarantee to a lender until a loan is repaid. If the borrower defaults, the lender has a right to sell the collateral asset.An example of a type of financial collateral that can be offered is a life insurance policy which has acquired a cash surrender value equal or greater in value to the loan amount. This could be pledged as security.


Collateral

Collateral

The property or other asset which the lender can sell to repay the loan if the borrower does not keep up the mortgage payments. In most cases, the home is collateral on a mortgage. If the borrower fails to repay the loan, the property will be repossessed. 


Collateral trust bonds

Collateral trust bonds

A bond in which the issuer (often a holding company) grants investors a lien on stocks, notes, bonds, or other financial asset as security. Compare mortgage bond.


Collateralized Bond Obligation (CBO)

Collateralized Bond Obligation (CBO)

Investment-grade bonds backed by a collection of junk bonds with different levels of risk, called tiers, that are determined by the quality of junk bond involved. CBOs backed by highly risky junk bonds receive higher interest rates than other CBOs.


Further Suggestions

Collateralized mortgage obligation (CMO)


 
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