Collateral Valuation

Collateral valuation refers to assessing the worth of an asset that a borrower offers to secure a loan. Lenders evaluate the collateral to ensure that if the borrower cannot repay the loan, they can recover their losses by selling the asset. This process considers factors like the asset's current market value, condition, and liquidity. Proper collateral valuation helps lenders minimize risk and determine how much they can safely lend. Essentially, it’s about understanding the value of what’s being put up as security, ensuring it reliably backs the loan.