1

collateral

noun col·lat·er·al \ kə-ˈla-t(ə-)rəl \
Updated on: 16 Nov 2017

Definition of collateral

plural collaterals
1 :property (such as securities) pledged by a borrower to protect the interests of the lender
2 :a collateral relative
  • A collateral inherited the estate.
3 :a branch of a bodily part (such as a vein)
4 :informational materials (such as brochures and fact sheets) used in selling a product or service to a prospective customer or buyer
  • Attendees can expect to make approximately 50 new business contacts and should … have an ample supply of business cards, marketing collateral and anything else to help potential leads remember them.
  • —Nancy Hollingshead and Laurie Winslow

Recent Examples of collateral from the Web

These 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.

Did You Know?

If an official talking about some policy refers to a collateral issue, he or she means something that may be affected but isn't central to the discussion. To an anthropologist, your cousin would be called a collateral relative, since he or she (unlike your grandmother, brother, or daughter) is "off to the side" of your direct line of descent. As a noun, collateral means something provided to a lender as a guarantee of repayment. So if you take out a loan or mortgage to buy a car or house, the loan agreement usually states that the car or house is collateral that goes to the lender if the sum isn't paid.

Origin and Etymology of collateral

Other Anthropology Terms


2

collateral

adjective

Definition of collateral

1 a :accompanying as secondary or subordinate :concomitant
  • digress into collateral matters
b :indirect
  • no direct objection, but a few collateral ones
c :serving to support or reinforce :ancillary
  • collateral evidence was presented at the trial
2 :belonging to the same ancestral stock but not in a direct line of descent — compare lineal 3a
  • Brothers, cousins, uncles, and nephews are collateral kinsmen.
3 :parallel, coordinate, or corresponding in position, order, time, or significance
  • collateral states like Athens and Sparta
4 a :of, relating to, or being collateral used as security (as for payment of a debt or performance of a contract)
b :secured by collateral
  • a collateral loan secured by stocks and bonds deposited with the lender

collaterality

play \kə-ˌla-tə-ˈra-lə-tē\ noun

collaterally

play \kə-ˈla-t(ə-)rə-lē\ adverb

Examples of collateral in a Sentence

  1. the collateral effects of the government's policies

Recent Examples of collateral from the Web

These 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.

Origin and Etymology of collateral

Middle English, from Anglo-French, from Medieval Latin collateralis, from Latin com- + lateralis lateral


Financial Definition of COLLATERAL

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.


COLLATERAL Defined for English Language Learners

collateral

adjective

Definition of collateral for English Language Learners

  • : related but not in a direct or close way


collateral

noun

Definition of collateral for English Language Learners

  • : something that you promise to give someone if you cannot pay back a loan


Medical Dictionary

1

collateral

adjective col·lat·er·al \ kə-ˈlat-ə-rəl, -ˈla-trəl \

medical Definition of collateral

1 :relating to or being branches of a bodily part
  • collateral sprouting of nerves
2 :relating to or being part of the collateral circulation
  • collateral circulatory vessels
  • collateral blood flow

2

collateral

noun

medical Definition of collateral

1 :a branch especially of a blood vessel, nerve, or the axon of a nerve cell
  • excitation of axon collaterals
2 :a bodily part (as a ligament) that is lateral in position

Law Dictionary

1

collateral

adjective col·lat·er·al \ kə-ˈla-tə-rəl, -ˈla-trəl \

legal Definition of collateral

1 a :accompanying as a secondary fact, activity, or agency but subordinate to a main consideration
b :not directly relevant or material
  • a collateral evidentiary matter
  • a collateral issue
2 :belonging to the same ancestral stock but not in a direct line of descent — compare lineal
3 a :of, relating to, or being collateral used as a security (as for payment of a debt)
b :secured by collateral
  • a collateral loan

collaterally

adjective

2

collateral

noun

legal Definition of collateral

1 :a collateral relative
2 :property pledged by a borrower to protect the interests of the lender in the event of the borrower's default; specificallyunder Article 9 of the Uniform Commercial Code :property subject to a security interest


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