What is Collateral?
Collateral: An asset pledged to secure a loan.
Where Collateral fits
Collateral is part of Credit & Risk in Finance. Credit lets you use money now and repay later with interest. Collateral secures a loan, a credit score signals reliability, and diversification limits risk.
Practical tip
Borrow only for things that earn more than the interest costs.
Related terms
- Diversification
- Spreading money or products across several areas to reduce risk.
- Interest rate
- The price of borrowing money, shown as a percentage.
- Budget
- A plan for how much money you expect to earn and spend.
- Credit score
- A number showing how likely someone is to repay debts.
Formulas you will use with it
Test yourself
Which term means: “An asset pledged to secure a loan.”?
Budget · Collateral · Diversification
Answer: Collateral
Learn Collateral by playing
Quizzes, a CEO simulator, a real estate tycoon game and startup tools. Free to start, in 7 languages.
Play BizJourney free →