Collateral refers to assets or property that a borrower pledges to a lender as a security for a loan. This serves as a guarantee for the lender that if the borrower is unable to repay the loan, the lender can seise and sell the collateral to recover the borrowed amount.

Collateral can take various forms, such as real estate, vehicles, equipment, inventory, or even financial assets like stocks or bonds. It provides a level of assurance for lenders and allows borrowers to access loans they might not otherwise qualify for.

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