|Credit is a loan often secured by collateral or a guarantee. Can anyone tell me what collateral means? Do you know what a guarantee is?
Lenders take a risk to lend you money. Therefore, they want to be sure that their money is secure.
Collateral is security you provide the lender.
A guarantee is a form of collateral.
In a secured loan, the borrower offers collateral for the loan.
An unsecured loan is not backed by collateral.
An asset is something valuable that you own, like a car, savings and investment accounts, and property such as your home.
Can you think of other assets that could be used to secure a loan?
Some items generally cannot be used as collateral, unless they are used to secure the purchase of that item itself. These include: