Collateral is a security in the form of an asset or property offered against a loan. Financial institutions require collateral for mortgages and other secured loans, including foreclosure, non-recourse loans, and repossession.
If you were to buy a house and needed a loan from the bank they would need collateral ie. The house would be the collateral. If you were unable to pay back the loan then the ban could or would take the house off you as that was your security. hope this makes it easier!!!! And best of luck!
Collateral assets come in many forms. Defined by the Small Business Administration, collateral is "an additional form of security which can be used to assure a lender that you have a second source of loan repayment." Most commonly, collateral is real property (i.e. an owner-occupied home), but it can also be represented by your business's inventory, cash savings or deposits, and equipment. In order to structure a loan that benefits both you and your business, you'll need to make the right decision about what you offer up as collateral to the bank. It's also important to be realistic when considering the risks of defaulting on a loan, which could have harsh consequences for not only your business, but for your personal life, too.