Collateral is an asset pledged by a borrower to secure a loan and is subject to seizure in the event of default.
Mortgage Context:
“The house serves as collateral for the mortgage, meaning the bank can seize the property if the borrower fails to make payments.”

Business Loan:
“To obtain a business loan, the company had to put up its equipment as collateral, ensuring the lender has something to recover in case of default.”

Personal Loan:
“When applying for a personal loan, David offered his car as collateral, which helped him secure a lower interest rate.”

Auto Loan:
“Since the car is collateral for an auto loan, the lender can repossess it if the borrower stops making payments.”

Real Estate Investment:
“The investor used one of his rental properties as collateral to secure financing for a new commercial project.”