Collateral security

COLLATERAL SECURITY, contracts. A separate obligation attached to another contract, to guaranty its performance. By this term is also meant the transfer of property or of other contracts to insure the performance of a principal engagement. The property or securities thus conveyed are also called collateral securities. 1 Pow. Mortg. 393; 2 Id. 666, n. 871; 3 Id. 944, 1001.

collateral security

an ASSET which a BORROWER is required to deposit with, or pledge to, a LENDER as a condition of obtaining a LOAN, which can be sold off if the loan is not repaid. For example, a bank may require a borrower to hand over the title deeds to his house as collateral for a BANK LOAN, or a company may issue DEBENTURE stock as a means of obtaining loan capital, which is secured by a charge on the company's business assets.

collateral security

the ASSETS pledged by a BORROWER as security for a LOAN, for example, the title deeds of a house. In the event of the borrower defaulting on the loan, the LENDER can claim these assets in lieu of the sum owed. See DEBT, DEBTOR.