What is a collateral?

Collateral is termed as a asset pledged by a borrower that may be seized by a lender to recover the value of a loan if the borrower fails to meet the requirement charges or repayments.
Collateral could be land, house document’s, car etc.
In indian agriculture system landlord’s gives loans to the farmer with collateral being taken of as documents of farmers land.

What is collateral? While many lenders have not defined “collateral” and instead are left to their own interpretation, there are some things a homeowner or business can do to define the term.

Collateral is a security that banks create charge for securing any loan facility.

For eg. If you are applying for a business loan and the bank might insist a property standing in your name to be mortgaged as security (subject to legal scrutiny and valuation) for the loan. Here, the property you mortgage becomes the collateral to the loan.