Financial collateral

Financial collateral is an asset pledged by a borrower to a lender as security for a loan or financial agreement. If the borrower fails to meet their obligations, the lender has the right to sell or use the collateral to recover the owed amount. Common forms include cash, securities, or other valuable assets. It helps reduce the lender's risk, making it easier to lend money or extend credit. Essentially, collateral provides assurance that the lender can recover some or all of their funds if the borrower defaults.