Collateral Trusts

A collateral trust is a financial arrangement where a borrower pledges specific assets or securities as collateral to secure a loan or financial obligation. This means that if the borrower fails to repay, the lender can claim the pledged assets. The collateral can include stocks, bonds, or other financial instruments. This arrangement provides lenders with added security, as they have a guaranteed asset to recover their funds in case of default. It's often used in corporate financing to enhance trust between borrowers and lenders, ensuring that the loan is backed by tangible value.