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[3] [4] A pawnbroker is a common example of a business that may accept a wide range of items as collateral. The type of the collateral may be restricted based on the type of the loan (as is the case with auto loans and mortgages); it also can be flexible, such as in the case of collateral-based personal loans.
Collateral management is the method of granting, verifying, and giving advice on collateral transactions in order to reduce credit risk in unsecured financial transactions. The fundamental idea of collateral management is very simple, that is cash or securities are passed from one counterparty to another as security for a credit exposure. [ 9 ]
For example, a collateral contract is formed when one party pays the other party a certain sum for entry into another contract. A collateral contract may be between one of the parties and a third party. It can also be epitomized as follows: a collateral contract is one that induces a person to enter into a separate "primary" contract.
Often, the asset in question is the thing you’re borrowing the money for. With an auto loan, for example, you agree that your car is used as collateral for the money to buy the car. You get ...
Collateral protection insurance (CPI) is a lender-chosen safeguard when borrowers lack full coverage car insurance. CPI coverage typically focuses on physical damage, including collision and ...
The reason behind the creation of CLOs was to increase the supply of willing business lenders, so as to lower the price (interest costs) of loans to businesses and to allow banks more often to immediately sell loans to external investor/lenders so as to facilitate the lending of money to business clients and earn fees with little to no risk to themselves.
Examples of typical collateral are shares of stock, livestock, and vehicles. A security agreement is not used to transfer any interest in real property (land/real estate), only personal property. The document used by lenders to obtain a lien on real property is a mortgage or deed of trust .
"Collateral damage" is a term for any incidental and undesired death, injury or other damage inflicted, especially on civilians, as the result of an activity. Originally coined to describe military operations, [ 1 ] it is now also used in non-military contexts to refer to negative unintended consequences of an action.