collateral loan

Dictionary of Banking Terms for: collateral loan
collateral loan

loan secured by a pledge of assets. Loans secured by collateral are primarily commercial loans where the ultimate source of repayment is the borrower’s assets, rather than the borrower’s character or reputation in the community. The lender’s financing statementlists the collateral securing the loan, and the location and condition of the collateral. When filed with a public records office, a lien is created, giving the lender priority over other creditors.

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