• Assets than can be repossessed if a borrower defaults.

• Collateral is what the borrower pledges as security to the lender. In case of default, the lender can take possession of the collateral and sell it to cover the loan deficiency. The collateral can be viewed as the minimum payment in case of default on the loan.

• Is the underlying security, mortgage, or asset for the purposes of securitization or borrowing and lending activities. It is pledged or held in trust.

• The items used by a borrower to back up a loan; any assets against which a lender has a legal claim if the borrower defaults on some provision of the loan.

• Securities, evidence of deposit or other property that a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.

 Embedded terms in definition
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Underlying security
 Referenced Terms
 Aging: Is the concept which assumes that newly issued mortgages tend to prepay slower than mortgages which are older or seasoned. This aging refers to the underlying Collateral and not the securities created upon that collateral.

 Automatic stay: The restricting of liability holders from collection efforts of Collateral seizure, which is automatically imposed when a firm files for bankruptcy under Chapter 11.

 Bond: Long-term debt instrument used by business and government to raise large sums of money, generally from a diverse group of lenders. In the case of business bond issuers, a specific asset or assets are pledged as Collateral.A bond is essentially a loan made by an investor to a division of the government, a government agency, or a corporation. The bond is a promissory note to repay the loan in full at the end of a fixed time period. The date on which the principal must be repaid is the called the maturity date, or maturity. In addition, the issuer of the bond, that is, the agency or corporation receiving the loan proceeds and issuing the promissory note, agrees to make regular payments of interest at a rate initially stated on the bond. Interest from bonds is taxable based on the type of bond. Corporate bonds are fully taxable, municipal bonds issued by state or local government agencies are free from federal income tax and usually free from taxes of the issuing jurisdiction, and Treasury bonds are subject to federal taxes but not state and local taxes. Bonds are rated according to many factors, including cost, degree of risk, and rate of income.A formal certificate of debt, issued by corporations or units of government.A legal obligation of an issuing company or government to repay the principal of a loan to bond investors at a specified future date. Bonds are usually issued with a Par or face value of $1,000, representing the amount of money borrowed. The issuer promises to pay a percentage of the par value as interest on the borrowed funds. The Interest payment is stated on the face of the bond at issue.Bonds are debt and are issued for a period of more than one year. The U.S. government, local governments, water districts, companies and many other types of institutions sell bonds. When an investor buys bonds, he or she is lending money. The seller of the bond agrees to repay the principal amount of the loan at a specified time. Interest-bearing bonds pay interest periodically.The term bond refers to long-term debt of companies or governments.

 Buy on margin: A transaction in which an investor borrows to buy additional shares, using the shares themselves as Collateral.

 Collateral trust bond: 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.Is a security issued by a corporation and is secured by other securities. This bond compares to Mortgage Backed Securities which are secured by real property or unsecured bonds. Depending on the underlying Collateral and the terms of the issue, these bonds can offer somewhat better financing rates to the issuer.

 Related Terms
 Collateral trust bond

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