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collateral

noun
col·​lat·​er·​al | \ kə-ˈla-t(ə-)rəl How to pronounce collateral (audio) \
plural collaterals

Definition of collateral

 (Entry 1 of 2)

1 : property (such as securities) pledged by a borrower to protect the interests of the lender
2 : a collateral relative A collateral inherited the estate.
3 : a branch of a bodily part (such as a vein)
4 : informational materials (such as brochures and fact sheets) used in selling a product or service to a prospective customer or buyer Attendees can expect to make approximately 50 new business contacts and should … have an ample supply of business cards, marketing collateral and anything else to help potential leads remember them.— Nancy Hollingshead and Laurie Winslow

collateral

adjective

Definition of collateral (Entry 2 of 2)

1a : accompanying as secondary or subordinate : concomitant digress into collateral matters
b : indirect no direct objection, but a few collateral ones
c : serving to support or reinforce : ancillary collateral evidence was presented at the trial
2 : belonging to the same ancestral stock but not in a direct line of descent — compare lineal sense 3a Brothers, cousins, uncles, and nephews are collateral kinsmen.
3 : parallel, coordinate, or corresponding in position, order, time, or significance collateral states like Athens and Sparta
4a : of, relating to, or being collateral used as security (as for payment of a debt or performance of a contract)
b : secured by collateral a collateral loan secured by stocks and bonds deposited with the lender
Other Words from collateral Did You Know? More Example Sentences Learn More about collateral

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Other Words from collateral

Adjective

collaterality \ kə-​ˌla-​tə-​ˈra-​lə-​tē How to pronounce collaterality (audio) \ noun
collaterally \ kə-​ˈla-​t(ə-​)rə-​lē How to pronounce collaterally (audio) \ adverb

Did You Know?

If an official talking about some policy refers to a collateral issue, he or she means something that may be affected but isn't central to the discussion. To an anthropologist, your cousin would be called a collateral relative, since he or she (unlike your grandmother, brother, or daughter) is "off to the side" of your direct line of descent. As a noun, collateral means something provided to a lender as a guarantee of repayment. So if you take out a loan or mortgage to buy a car or house, the loan agreement usually states that the car or house is collateral that goes to the lender if the sum isn't paid.

Examples of collateral in a Sentence

Adjective

 the collateral effects of the government's policies

Recent Examples on the Web: Noun

 The executive said WeWork could also explore whole-business securitizations, or the practice of pledging royalties, fees, intellectual property and other key assets as collateral, the person said. — Sarah Mcbride, Fortune, "Now WeWork’s Biggest Investor Wants to Shelve Its Troubled IPO—For Now," 10 Sep. 2019 As collateral, Norwegian is even offering up its landing slots at London's Gatwick Airport, a key element of its transatlantic business. — Jessica Puckett, Condé Nast Traveler, "Norwegian Air Is Taking Last-Ditch Measures to Avoid Bankruptcy," 4 Sep. 2019 Members of the group say SOFR is more reliable than Libor because it is derived from the rate to borrow cash overnight using U.S. government securities as collateral. — Daniel Kruger, WSJ, "Fed Group Proposes Adjustable-Rate Mortgages Using Libor Replacement," 11 July 2019 That stems from farmers pledging their land as collateral to build the Roosevelt Dam and gives large landowners immense power in deciding who controls the organization. — Ryan Randazzo, azcentral, "SRP system for electing leaders criticized as unfair and undemocratic," 6 June 2019 Middleton, who had a 2.04 ERA and six saves in 16 games last season, tore the ulnar collateral ligament in his right elbow while pitching against the Minnesota Twins on May 13, 2018. — Mike Digiovanna, Los Angeles Times, "Angels closer Keynan Middleton activated after 15-month Tommy John recovery," 27 Aug. 2019 The Giants also placed reliever Trevor Gott on the 10-day injured list with a strained right flexor tendon and a Grade 1 sprain of his ulnar collateral ligament. — Henry Schulman, SFChronicle.com, "Giants promote top infield prospect Mauricio Dubon, cut Scooter Gennett," 27 Aug. 2019 Rogers obviously helps to replace Gott, who, Bochy said, was diagnosed with a mild strain in his flexor tendon and a grade one sprain of the ulnar collateral ligament, which would indicate there is no tear. — Curtis Pashelka, The Mercury News, "Giants prospect on sharing clubhouse with childhood idols: “It’s crazy”," 27 Aug. 2019 Among the athletes who have sustained torn ulnar collateral ligaments and were operated on by Shin include Los Angeles Angels outfielder Mike Trout, Houston Rockets center Clint Capela and Oklahoma City Thunder point guard Chris Paul. — Ryan O'halloran, The Denver Post, "Broncos QB Drew Lock suffers sprained right thumb, expected to miss start of regular season, source says," 20 Aug. 2019

Recent Examples on the Web: Adjective

 And for digital marketing on Facebook and Google, graphic design for collateral material, even wireframes for website building. — Christina Stembel, Quartz at Work, "Creating Farmgirl Flowers taught me my high school education is more than enough," 29 Aug. 2019 The surgery to reconstruct Sandoval’s ulnar collateral ligament will be performed by Dr. Neal ElAttrache in Los Angeles. — John Shea, SFChronicle.com, "Giants’ Sandoval awaits Tommy John surgery, will he get one more at-bat?," 24 Aug. 2019 The novel is also shot through with the unexpected collateral effects of that game-changing technology, the telegraph. — Belinda Luscombe, Time, "'I Put 1,400 Pages in the Trash.' The Tiger's Wife Author Téa Obreht on Killing Two Books to Create Her New Novel," 13 Aug. 2019 Now, as a response to white supremacist violence, what might be sold as simple fixes to Section 230 will likely have similarly immense collateral consequences. — Melissa Gira Grant, The New Republic, "No Law Can Ban White Supremacy From the Internet," 9 Aug. 2019 Of those arrested, 18 were members of families and 17 were collateral apprehensions of people in the country illegally encountered by Immigration and Customs Enforcement officials. — Fortune, "Immigration Operation Touted by Trump Nets 35 Arrests," 23 July 2019 In return, a portion of her DoorDash shares become collateral with the third party custodian. — Lucinda Shen, Fortune, "Wealth Advisory Platform SecFi Closes $6 Million Funding Round," 19 July 2019 The win-at-all costs, collateral-damage-be-damned mentality of Selina this year was both delicious and disturbing to watch. — Dan Snierson, EW.com, "Julia Louis-Dreyfus calls Emmy nods for final Veep season ‘supremely satisfying’," 16 July 2019 Immigration activists decry such collateral arrests, which were sharply curtailed during President Barack Obama’s second term. — Washington Post, "Making an immigration arrest requires hours of surveillance," 15 July 2019

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'collateral.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of collateral

Noun

1691, in the meaning defined at sense 2

Adjective

14th century, in the meaning defined at sense 1a

History and Etymology for collateral

Adjective and Noun

Middle English, from Anglo-French, from Medieval Latin collateralis, from Latin com- + lateralis lateral

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More Definitions for collateral

collateral

noun

Financial Definition of collateral

What It Is

Collateral is an asset pledged by a borrower to a lender, usually in return for a loan. The lender has the right to seize the collateral if the borrower defaults on the obligation.

How It Works

Let's assume you would like to borrow $100,000 to start a business. Even if you have an excellent credit rating, a bank may be reluctant to lend you the money because it may be left with nothing if you default on the loan. Thus, the bank may require $100,000 of collateral in order to lend you the money. This collateral might consist of financial instruments, houses, cash, or even objects such as art, jewelry, or other items. You might also pledge your business receivables as well.

If you do in fact default on the loan, the loan agreement gives the lender the right to seize and then sell the collateral in order to recover any outstanding balance.

Why It Matters

Collateral is security, which is why collateralized loans often receive better interest rates than unsecured loans, since the lender bears less risk.

Although mortgages are one of the most common collateralized obligations (with the house being the collateral), many other kinds of lending circumstances require collateral. For instance, margin loans almost always require collateral. Frequently the collateral is the securities involved in the margin loan.

However, the type and amount of collateral required for a given loan is often a matter of negotiation between the lender and borrower. For instance, a lender might require a borrower to pledge any assets purchased during the loan period as additional collateral. In some cases, collateral for one obligation can also be collateral for other obligations (this is called cross-collateralization). This often occurs in real estate transactions, where a house collateralizes more than one mortgage.

Source: Investing Answers

collateral

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