collateral
noun
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Definition of collateral
(Entry 1 of 2)
collateral
adjectiveDefinition of collateral (Entry 2 of 2)
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Other Words from collateral
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noun
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adverb
Examples of collateral in a Sentence
Adjective
the collateral effects of the government's policiesRecent Examples on the Web: Noun
He was sent to New York and had an MRI that revealed a torn ulnar collateral ligament. — Ronald Blum, The Seattle Times, "AP source: Wilson Ramos, Mets agree to $19M, 2-year deal," 16 Dec. 2018 Cohen used 32 medallions as collateral for loans, and at the time the medallions brought in more than $1 million a year and are valued at over $1 million, The Times reports. — Kaitlyn Schallhorn, Fox News, "Michael Cohen's legal problems involve business dealings, payments to porn star: What to know," 21 Aug. 2018 At the start of this month, the central bank said that commercial banks could use some of their small-business loans as collateral for borrowing money at low interest rates directly from the central bank. — Keith Bradsher, New York Times, "As China Curbs Borrowing, Growth Shows Signs of Faltering," 14 June 2018 Conflicted regulators let banks lend huge sums with inflated real estate as collateral. — Peter Landers, WSJ, "The Old U.S. Trade War With Japan Looms Over Today’s Dispute With China," 13 Dec. 2018 Faraday Future asked the arbitrator to loosen Evergrande’s grip on its IP and other assets, which were offered as collateral in order to secure the $2 billion investment. — Sean O'kane, The Verge, "Federal court freezes Faraday Future CEO’s ownership stake, California mansions," 14 Dec. 2018 The board will review a resolution approving the release of collateral for the loan. — Tom Daykin, Milwaukee Journal Sentinel, "City loan to help finance downtown Milwaukee's Moderne apartment high-rise paid off," 19 June 2018 Lender JPMorgan Chase Bank has agreed to A’Gaci’s continued use of cash collateral through the first week of May. The bank has a security interest in the cash. — Patrick Danner, San Antonio Express-News, "Bankrupt retailer A’Gaci cancels auction," 2 Apr. 2018 In return for the investment, Evergrande wound up with a 45 percent stake in the company, and Faraday Future also pledged its intellectual property and most of its hard assets as collateral. — Sean O'kane, The Verge, "Faraday Future dealt potentially crippling blow while almost out of cash," 30 Nov. 2018Recent Examples on the Web: Adjective
Since late last year, cryptocurrency prices have plummeted, lowering the value of the collateral Salt lent money against. — Shane Shifflett, WSJ, "Firm Tied to Cryptocurrency Entrepreneur Faces SEC Investigation," 15 Nov. 2018 Safety Net Deploys Bailouts, collateral, cash on hand — Fred Trump was prepared and was not about to let bad bets sink his son. — Susanne Craig, The Seattle Times, "Trump engaged in suspect tax schemes as he reaped riches from father," 2 Oct. 2018 The number could tick up if officers come across other undocumented immigrants in the course of their actions and make what are known as collateral arrests. — James Hohmann, Washington Post, "The Daily 202: Unexpected defeat in rural Wisconsin special election sets off alarm bells for Republicans," 17 Jan. 2018 Her little brother is dragged along to become a reluctant wolf pup: collateral camp damage. — Nalini Jones, New York Times, "When the Going Gets Tough, These Kids Find Their Way," 13 Apr. 2018 Shohei Ohtani swung a bat back in Southern California for the first time since sustaining a Grade 2 sprain of his right ulnar collateral ligament on June 6. — Jeff Miller, latimes.com, "Shohei Ohtani has been cleared to resume hitting, Mike Trout could return to center field Friday," 29 June 2018 The surgery pioneered by Dr. Frank Jobe involves replacing a torn or ruptured ligament in the elbow known as the ulnar collateral ligament with a tendon from another part of the body. — Craig Davis, Sun-Sentinel.com, "Teen Tommy John surgeries, youth sports injuries reach epidemic proportions," 28 June 2018 From Los Angeles: Shohei Ohtani heads to disabled list with sprained ulnar collateral ligament. — Tribune News Service, OregonLive.com, "MLB trade rumors: Will the Seattle Mariners try to acquire Cole Hamels?," 11 June 2018 Applying for a collateral loan Some banks offer personal loans that use something other than a home as collateral. — Josh Smith, USA TODAY, "Health care costs: 10 credit options to help manage the expenses involved," 16 Apr. 2018These example sentences are selected automatically from various online news sources to reflect current usage of the word 'collateral.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.
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More Definitions for collateral
collateral
nounFinancial Definition of collateral
What It Is
Collateral is an asset pledged by a borrower to a lender, usually in return for a loan. The lender has the right to seize the collateral if the borrower defaults on the obligation.
How It Works
Let's assume you would like to borrow $100,000 to start a business. Even if you have an excellent credit rating, a bank may be reluctant to lend you the money because it may be left with nothing if you default on the loan. Thus, the bank may require $100,000 of collateral in order to lend you the money. This collateral might consist of financial instruments, houses, cash, or even objects such as art, jewelry, or other items. You might also pledge your business receivables as well.
If you do in fact default on the loan, the loan agreement gives the lender the right to seize and then sell the collateral in order to recover any outstanding balance.
Why It Matters
Collateral is security, which is why collateralized loans often receive better interest rates than unsecured loans, since the lender bears less risk.
Although mortgages are one of the most common collateralized obligations (with the house being the collateral), many other kinds of lending circumstances require collateral. For instance, margin loans almost always require collateral. Frequently the collateral is the securities involved in the margin loan.
However, the type and amount of collateral required for a given loan is often a matter of negotiation between the lender and borrower. For instance, a lender might require a borrower to pledge any assets purchased during the loan period as additional collateral. In some cases, collateral for one obligation can also be collateral for other obligations (this is called cross-collateralization). This often occurs in real estate transactions, where a house collateralizes more than one mortgage.
Source: Investing Answers
collateral
noun
English Language Learners Definition of collateral
(Entry 1 of 2)
collateral
adjectiveEnglish Language Learners Definition of collateral (Entry 2 of 2)
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collateral
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Medical Definition of collateral
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collateral
nounMedical Definition of collateral (Entry 2 of 2)
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collateral
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Legal Definition of collateral
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