Collateral Trust Agreement

A Collateral Trust Agreement is a legal arrangement where a borrower pledges certain assets, like stocks or bonds, to secure a loan. This means that if the borrower fails to repay, the lender can claim these assets to recover their money. Essentially, it protects the lender's interests by providing them with collateral—something of value that they can take if needed. This type of agreement is often used in corporate financing, helping to ensure that the lender has a safeguard in case the borrower cannot meet their obligations.