Collateral

Collateral is an asset that a borrower pledges to a lender as security for a loan. It serves as a safeguard for the lender, ensuring they can recover their funds if the borrower defaults on repayment.

What You Need To Know

Collateral is a cornerstone of both traditional and decentralized lending systems, enabling borrowers to secure funding while providing lenders with assurance against default risks. However, borrowers should carefully assess the risks of pledging valuable assets before entering into secured loan agreements.