Meaning of Word
Collateral refers to something pledged as security for the repayment of a loan or debt, or something related to or secondary to the primary objective or action.
Definitions and Meaning in English
- Property or assets pledged as security for a loan, to ensure repayment.
- Something secondary or indirect, often related to a main cause or issue.
- A related but secondary aspect or outcome of an event or action.
- In a legal or financial context, an asset that can be seized if a borrower defaults on a loan.
- Materials or information that support or complement a primary activity or goal.
History and Origin
The term “collateral” comes from the Latin word “collateralis”, meaning “side by side” or “additional.” It entered English in the 16th century, initially describing something parallel or secondary to a main action. The financial use of the term evolved to describe assets pledged as security, becoming more widely used in banking and lending practices. Over time, the word also developed broader meanings, particularly in legal and business contexts.
Detailed Explanation
Collateral primarily refers to assets that a borrower provides to a lender as security for a loan or debt. In the event the borrower defaults, the lender has the right to seize these assets to recover the owed amount. Common forms of collateral include property, vehicles, or investments.
In addition to its financial meaning, “collateral” can also describe something that is secondary or supplementary. For example, collateral damage refers to unintended or incidental damage that occurs as a result of an action, typically in military or conflict contexts. In business or marketing, collateral often refers to promotional materials, such as brochures or advertisements, used to support a product or service.
Example Sentences
- The bank required collateral before approving the mortgage loan.
- He offered his car as collateral for the loan to start his business.
- The company provided collateral in the form of inventory to secure the line of credit.
- The collateral damage of the storm affected the surrounding communities.
- The investor demanded collateral for the high-risk loan he was considering.
- The insurance policy acted as collateral for the financing of the project.
- The collateral materials helped boost the product’s visibility in the market.
- The lender took possession of the house as collateral when the borrower defaulted.
- Collateral damage in the conflict displaced thousands of innocent civilians.
Synonyms with Short Explanation
- Security – Something of value pledged to secure the repayment of a debt.
- Pledge – An asset or property offered as security for a loan or agreement.
- Guarantee – A promise or assurance, often backed by collateral, that an obligation will be fulfilled.
- Asset – Property or resources that can be used as collateral or security.
- Surety – A person or thing that takes on the responsibility of ensuring a debt is repaid, often using collateral.
Related Words with Short Explanation
- Loan – Money borrowed that is expected to be paid back, often with interest and secured by collateral.
- Debt – The amount of money owed by one party to another, often secured by collateral.
- Mortgage – A type of loan secured by real estate or property.
- Lender – An individual or institution that provides loans, often requiring collateral.
- Default – The failure to repay a loan, which may lead to the seizure of collateral.
More Matches with Short Explanation
- Collateral damage – Unintentional damage or harm that occurs as a result of an action, often used in military or emergency contexts.
- Collateral security – Additional assets pledged to secure a loan or debt.
- Collateralized debt – A debt that is secured by collateral, such as a mortgage or auto loan.
- Collateral source – A legal term referring to a separate source of compensation or damages in a case.
- Collateralized loan – A loan where the borrower offers collateral as security in case of default.
Antonyms
- Unsecured – A loan or debt that is not backed by collateral or security.
- Unprotected – Lacking any form of security or safeguard.
- Risky – Describing a situation without collateral or security, often leading to higher risk.
- Non-collateralized – Refers to loans or transactions that do not require collateral.
- Unwarranted – Describing something not supported by evidence or security, like a claim without collateral backing.