What is "collateral"?

What is "collateral"?

Mitchell Freedman, CPA/PFS (CEO, MFAC Financial Advisors) gives expert video advice on: Where can I get a loan?; Are credit union loan rates always lower than bank loan rates?; How can I borrow money to buy a car? and more...

Frequently, a lender will want to be assured that they're going to be able to get paid. They may question the ability of the borrower to pay, so they'll ask for collateral. Collateral is the putting up of something of value to secure the repayment of the debt. Now, when I say secure the repayment, what that means is in the event the borrower cannot pay, then the collateral can be sold to reimburse the lender so that the lender can become whole.