Property or anything else of value that is pledged to a lender as loan security is

Property or anything else of value that is pledged to a lender as loan security is

• A. Collateral
• B. Security
• C. Principal
• D. Asset

Answer: (A)

Collateral is the asset promised to secure a loan. When you pledge something of value as collateral, the lender gains a claim to that asset if you can’t repay, which lowers the lender’s risk and can influence loan terms. The term describes the specific asset pledged, whereas security can refer to the broader guarantee or to financial instruments; the principal is the amount borrowed, not an asset, and an asset is any item of value, not necessarily pledged. Examples include a home used to back a mortgage, a car for an auto loan, or equipment pledged for a business loan.

Collateral is the asset promised to secure a loan. When you pledge something of value as collateral, the lender gains a claim to that asset if you can’t repay, which lowers the lender’s risk and can influence loan terms. The term describes the specific asset pledged, whereas security can refer to the broader guarantee or to financial instruments; the principal is the amount borrowed, not an asset, and an asset is any item of value, not necessarily pledged. Examples include a home used to back a mortgage, a car for an auto loan, or equipment pledged for a business loan.