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January 19, 2023
Collateral is an asset that a lender accepts as security for a loan. Depending on the purpose of the loan, collateral may take the shape of real estate or other types of assets. The collateral serves as a type of insurance for the lender. That is, if the borrower fails to make loan payments, the lender can seize and sell the collateral to recuperate some or all of its losses.
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