Collateral

Collateral is the property pledged to secure a loan, which the lender can seize through foreclosure if the borrower defaults.

What Collateral means

In a mortgage, the home itself is the collateral. Because the loan is secured, lenders offer lower rates than on unsecured debt like credit cards, but they hold a lien until you pay off the balance.

Florida example

When a Florida borrower stops paying, the lender enforces its claim on the collateral through the state's judicial foreclosure process. Keeping equity in the home protects you, since collateral value above the balance is yours.

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