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Collateral

Collateral

A valuable asset that is used to secure a loan. When a borrower pledges collateral, they are essentially providing the lender with an extra layer of security in case they default on the loan. Common examples of collateral include real estate, vehicles, stocks and bonds, and even jewelry or artwork. By pledging collateral, borrowers may be able to access larger loan amounts or better interest rates than they would without it. On the other hand, lenders may require collateral to protect themselves from the risk of lending money to someone who may not be able to repay it. In some cases, borrowers may even be required to provide multiple types of collateral in order to fully secure a loan. Overall, collateral plays an important role in the lending process and can greatly impact a borrower's ability to secure financing.

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