Collateralization - Explained
What is Collateralization?
Written by Jason Gordon
Updated at April 6th, 2023
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What is Collateralization?
In many credit agreements, a borrower is required to pledge some assets as collateral for the loan. These assets are known as "collateral". These assets can be seized by the lender when such borrower defaults on the repayment of the loan.
Collateralization is a situation whereby a borrower offers a specific property or assets to a lender to secure the loan in the event of the borrowers default on the loan. Collateralization gives lenders the confidence to issue a loan to the borrower, and an assurance that the loan will be repaid.
Back To: COMMERCIAL LAW: CONTRACTS, PAYMENTS, SECURITY INTERESTS, & BANKRUPTCY
Related Topics
- Secured Transactions Law (Intro)
- What is a Security Interest?
- Collateral
- Pledge as Collateral
- Collateralize
- Cross Collateralization
- After-Acquired Collateral
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Unsecured Loan Definition
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- What is a Secured Creditor?
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- Limited Recourse Debt
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Uniform Commercial Code - Article 9
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- How is a security interest created in Assignment of Accounts Receivable and Contract Rights?
- How does one perfect a security interest by Possession of the collateral?
- How does on perfect a security interest by Control of collateral?
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- Defeasance
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- What are the common conflicts arising as to priority of a security interest?
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- Lien - Definition
- Blanket Lien Definition
- Unperfected Lien
- Possessory Lien
- Non-Possessory Lien
- Tax Lien
- Mechanics Lien Definition
- Construction Lien
- Cloud on Title
- What is the priority of a buyer of collateral that is subject to a security interest?
- What is required to be a buyer in the ordinary course of business?
- How does 9-320(b) protect consumers who purchase goods from other consumers?
- What is the Shelter Principle?
- What are the general Priority Rules for Conflicting security interests?
- Subordination Agreement
- Who has Priority in Proceeds from the sale of collateral?
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- What is the priority of a PMSI in goods (other than inventory and livestock)?
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- What is the priority of conflicting PMSIs?
- What is the priority of security interests in fixtures?
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