An asset pledged by a debtor as security for a loan that will protect the lender in the event the debtor defaults on its loan obligations. In the event of a default, the lender may foreclose its interest and sell the collateral to recoup some or all of its losses.

Collateral may take different forms, including real estate, machinery and equipment, vehicles, inventory, cash and cash equivalents, or intangible assets such as intellectual property rights. The type of collateral offered as security for a loan will often depend on the purpose of the loan.

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