What term refers to property or anything of value pledged to a lender as loan security?

What term refers to property or anything of value pledged to a lender as loan security?

• A. Collateral
• B. Guaranty
• C. Security interest
• D. Mortgage

Answer: (A)

Collateral is the property or anything of value pledged to secure a loan. It gives the lender a claim to seize or sell that asset if the borrower doesn’t repay, reducing the lender’s risk. The asset can be cash, equipment, inventory, livestock, or real estate—anything of value pledged as security. Other terms describe related concepts but are not the pledged asset itself. A guaranty is a promise by another person to pay if the borrower defaults. A security interest is the lender’s legal claim in the pledged collateral created by the agreement. A mortgage is a specific lien on real estate used to secure a loan. The general term for the pledged asset is collateral.

Collateral is the property or anything of value pledged to secure a loan. It gives the lender a claim to seize or sell that asset if the borrower doesn’t repay, reducing the lender’s risk. The asset can be cash, equipment, inventory, livestock, or real estate—anything of value pledged as security.

Other terms describe related concepts but are not the pledged asset itself. A guaranty is a promise by another person to pay if the borrower defaults. A security interest is the lender’s legal claim in the pledged collateral created by the agreement. A mortgage is a specific lien on real estate used to secure a loan. The general term for the pledged asset is collateral.